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Regulatory-reform

Regulatory Reform

The Issue

Regulation costs individual smaller businesses £33,000 on average each year. This is an aggregate cost to the small business community in the UK of approximately £183 billion per annum. Regulation increases the cost of doing business, creates barriers to business activity and distorts business decision making and consequently resource allocation and results in lower profitability, reduced innovation, slower workforce growth and higher prices. The costings do no take account of the in-direct costs that smaller firms suffer as a result of regulations, which if estimated, would further increase the negative impact of regulation on smaller businesses.   

Some regulation is essential to a functioning economy and a successful small business community. For example, contract, intellectual property and insolvency laws all help commerce function through reducing uncertainties and risks. Although such regulation needs to be high quality in order maximise the benefits of such laws for smaller businesses. Often it is not of the optimum quality.

We believe reducing the quantity of regulation,  improving the quality of necessary regulations and making implementation and enforcement more sensitive to the circumstances of smaller businesses would reduce the cost of doing business, minimise the negative impacts that regulation has on smaller firms and improve the incentives for business growth and lead to a more successful small business community in the UK.

Action FSB has taken

  • We’ve argued for policy makers to ‘Think Small First’ so any new regulations are designed to minimise their impact on smaller firms alongside greater transparency and more rigour in the making of new regulations with more independent scrutiny of the rationale for and impact of regulations. 
  • We’ve called for the exiting stock of regulations to be reviewed by an independent review body and for politicians to reform the current regulatory environment for smaller firms to help support small business competitiveness.
  • We’ve argued for regulators to take a ‘partnership approach’ to regulating smaller firms. Such an approach would prioritise support and education for smaller enterprises about how best to comply with relevant legal obligations. Regulator performance should be monitored through a comprehensive and public accountability framework for regulators.

Our Asks

Smaller businesses want:

  • Less regulation.
  • Higher quality regulation where it is necessary i.e. rules that are more effectively designed and better drafted.
  • Regulation that is enforced in a small business sensitive way that takes account of the circumstances.

Small businesses want these goals to be achieved by simplifying the existing regulatory landscape, greater use of partial exemptions for smaller firms, greater discretion over meeting regulatory outcomes, better support through clearer and simpler guidance, fewer recording and reporting requirements, more tailored language and formats and in some cases complete exemptions from regulatory requirements, among other reforms.  In addition there needs to be a significant change in approach to the implementation and enforcement of regulation by regulators. They should look to work with and support smaller enterprises in their regulatory compliance.

Achievements in...


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UK/Westminster

  • FSB published, in 2017, a comprehensive report on how smaller firms wanted the regulatory environment reformed to help smaller businesses be more competitive.
  • The Government introduced a small and micro-business test into its regulatory policy-making process. The SaMBA, as it is known, encourages Government departments to explicitly consider the impact on smaller businesses of new regulations and justify why smaller firms need to be subject to the full range of obligations being proposed.  
  • The Small Business Act 2015 put into law an independent statutory body (the Regulatory Policy Committee) to validate the evidence about the impacts of new regulations on business.
  • The Coalition Government of 2010-15 also placed on regulators a ‘Growth Duty’ and required them to follow a ‘Regulators Code’, which together are aimed at ensuring regulators take more account of their impact on business and enforce regulations in a risk-based and proportionate manner. 
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Scotland

  • In 2013 we successfully lobbied the Scottish Government for a more considered and business-friendly approach to regulation.

  • In direct response to our campaigning, Holyrood passed the Regulatory Reform Bill.  

  • The Bill, which includes a new economic growth duty for regulators to adhere to, will reduce inconsistencies and help ensure local authorities regulate with small businesses in mind.

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