A new survey has found that the administrative burden of business reporting, bureaucracy and compliance is preventing many small businesses from reaching their full potential.
Regulations and government policies are hindering growth in the UK SME sector, according to new research. A survey, conducted by Censuswide on behalf of accounting software company FreeAgent, polled 500 UK companies with five to 20 employees.
Despite government pledges to cut red tape, SMEs say they are still facing difficulties when it comes to expanding their businesses - with 50% of respondents highlighting business performance reporting as a key challenge, while a quarter (26%) said compliance was an ongoing barrier.
Almost a fifth of respondents (18%) say that dealing with government policies and regulations is hindering their ability to grow. In addition, 46% say they are not confident that there will be more opportunities for business growth under the current government.
Red tape is a barrier to growth
- 50% of small businesses say that business reporting is a challenge when growing
- 26% of scaling businesses say compliance is a roadblock
- 18% of SMEs say dealing with government policies and regulations is a growth challenge
Cash flow and funding pressures
Other key issues highlighted by small business owners include the pressure of staying on top of cashflow and worries over future funding, while 28% of respondents say they are seeking better management strategies. In addition, nearly a third (31%) say paying employees is a key challenge, while over a quarter (27%) say they are increasingly worried about rising costs. An overwhelming 96% of businesses have had to adjust their financial management practices to keep pace with growth demands.
"At a time of economic uncertainty and fierce competition, it's more important than ever for the government, industry and the wider business community to work together to cut unnecessary bureaucracy and provide SMEs with the practical, reliable support they need. By removing roadblocks and ensuring access to clear guidance and resources, we can help unlock the full potential of UK businesses and drive the economy forward." Roan Lavery, ceo and co-founder, FreeAgent.
With unpredictable income and rising expenses putting significant strain on day-to-day operations and future plans, the findings show that over half (52%) of businesses say they have needed more funding as they scale. Many SMEs say they plan further investments to grow, such as taking on new staff and updating legacy systems (31%) and improving profitability (31%) - showing that many are having to adapt to meet changing market conditions.
The need for better business support
FreeAgent's research also reveals that over a third (34%) of UK SMEs are facing a saturated market and increasing competition as they expand. As a result, 28% said they have a plan to increase their business services while almost a quarter (24%) said they were planning to completely pivot their business offering in order to adapt and survive.
The findings suggest that businesses are searching for support on social media as well as from trusted advisers. While many are turning to industry groups (17%) and their own network (17%) for advice, almost as many rely on social media (12%) compared to those who rely on government resources (14%) or external consulting services (15%). This suggests that more expertise is required from the government and within the SME industry, to ensure business owners can access accurate, reliable guidance rather than relying on potentially unreliable advice from social media.
Written by Rachel Miller.