SMEs face £5.8bn bill due to buyer demands

27 July 2011

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27 July 2011 | Adam Leach

Small businesses in the UK have to spend a collective £5.8 billion on external services to deal with red tape and bureaucracy.

According to a study conducted by the Forum ofPrivate Business (FPB), this is in part due to buyers placing greater pressure on their suppliers to achieve specific accreditation to win work and to boost the overall image of their supply chain.

“Some of the bureaucratic increase is due to large private sector organisations demanding increased accreditation from their suppliers as a way of improving the perceived quality of their own services,” the report said.

The study, which surveyed more than 1,000 businesses, also suggested more accreditation is now required because a greater proportion of the work won by small firms is in the public sector or as part of public/private contracts.

One respondent to the survey explained that the time and level of resources required to comply with demands means that he has to hand the work over to external contractors. “[It's] costly and time consuming, harder to keep up with ever-changing regulations. We are forced to use outside consultants otherwise there would be no time to run the business,” he said.

The £5.8 billion was just a chunk of the £16.8 billion the small business group claims SMEs have to spend complying with rules and regulations. The total figure is up one per cent compared to two years ago, although the FPB says the impact of the rise is worse due to the poor economic climate.

Jane Bennett, head of campaigns at the FPB, said in statement: "While this is a rise of just 1 per cent compared to two years ago, the increase is greater in real terms because economic activity, which drives the need for compliance, has shrunk significantly since the 2009 survey was carried out.”

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