Wednesday, August 10, 2022

SME champion calls for post-Covid moves to steer UK from recession

The UK’s largest business group and academics are urging the Government to learn lessons from the implementation of COVID-19 health measures in order to create a commercial regulatory environment that will steer the economy away from recession.

The Federation of Small Businesses says more than a third of small firms found it quite or very difficult to understand the regulations relating to COVID security, according to a joint study from FSB, Newcastle University and the University of Birmingham.

One in five of almost 1,000 small businesses surveyed for the report say the line between advisory guidance and regulatory requirements during the pandemic was ‘totally unclear’.

That lack of clarity led to a tendency to ‘gold plate’ by some small firms – going beyond minimum requirements for fear of falling short – which comes at a cost in terms of worry, time and money.

The health and education sector struggled most when it came to compliance with COVID measures – four in ten reported difficulty in taking the appropriate action. One small firm interviewed as part of the study expressed their frustration around continued lack of certainty when it comes to negotiating working from home arrangements with employees.

About 18% of small firms ranked furlough as one of the most useful and at the same time, one of the most difficult pieces of regulation. The move to flexible furlough helped, as it removed unnecessary restrictions that prevented some small businesses from taking advantage of this vital lifeline.

Highlighting the resilience of the small business community, some found that, having adapted to the initial shock of engaging with a raft of new regulations, their new circumstances opened up novel opportunities to implement changes/innovations that they would maintain post-pandemic.

More than 80% of businesses relied on more than one source to find out about regulatory changes during the pandemic. Nearly three quarters relied on GOV.UK while half relied on business representative organisations such as FSB, which were reported to have tailored their language and regulatory information so that it was more useful to small businesses.

In light of the findings, FSB, Newcastle University and the University of Birmingham are urging governments and regulators across the UK to:

  • Clearly communicate the distinction between actions that a business must take, and the steps that a business might choose to take, when changing or introducing regulatory requirements.
  • Make effective use of intermediary bodies when communicating changes to regulation.
  • Publish illustrative examples of compliance to help small firms understand what good practice looks like
  • Introduce grace periods after regulatory changes are introduced to avoid penalising those doing their utmost to comply.
  • Minimise restrictions or red tape on schemes that are designed to help businesses, like furlough.

FSB National Chair Martin McTague said: “With economies now thankfully unlocked, this is the moment to step back and assess what broad regulatory lessons can be learned from the pandemic.

“While it is understandable that governments and regulators had to act at great speed as the circumstances of the pandemic evolved, some of the regulatory shortcomings were consistent with problems encountered in more normal times, including around clarity and communication.

“The gold plating trend that we saw over the lockdowns is not confined to health measures, this is a wider issue that drains firms of the resources they need to innovate, upskill and recruit as we work to secure our economic recovery.

“Constructive, clear regulation is a boon for small firms – ensuring they can excel in safe, productive environments. Complex red tape, by contrast, is a constant drag.

“The Government rightly set out its regulatory reforming zeal in the Queen’s Speech, and after Brexit it now has full control on this agenda. We’re now urging it to learn from best practice and adopt the British Colombia model, where they successfully reduced regulatory requirements on business by over a third in three years. This was done through a new smarter approach to remove red tape, and implementation of new regulation only where it is strictly required and effectively communicated.

“By taking forward the recommendations we’ve set out today, government and regulators can reform our compliance landscape so that it helps, rather than hinders, those looking to start-up, invest and expand.”

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