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Study refutes claims that British businesses are 'drowning in red tape'

Research from AXA reveals the assumption that red tape and regulation stifles SME growth bears little resemblance to the reality of many of the nations’ small businesses.

Eight hundred small firms were interviewed by AXA for the study [1]: 93 percent said regulation was neither burdensome nor costly for the day-to-day running of their businesses. The numbers who found regulations beneficial to their businesses far outweighed those who lamented them: 23 percent said regulations protect their customers; 17 percent felt compliance helps their public image, and 19 percent said regulations protect from claims.

Employment laws do not appear to be slowing down hiring plans either, as 91 per cent of small firms said they did not influence staffing decisions. Just 15 per cent of employers said they had to spend too much time or money on compliance.

AXA found a less satisfying result when it came to equality and discrimination laws. While most small business employers said they are committed to equal employment opportunities, a sizeable minority – 14 percent – said they would not hire a woman or someone from an ethnic minority for fear of ‘tribunals’ or accusations about workplace discrimination. This rose to 18 percent among male business owners.

“If this figure is representative of the overall population, it means that almost 700,000 business owners feel discouraged from hiring equally. It’s based on misconceptions: tribunals brought against employers on grounds of workplace discrimination are rare, but they get a lot of attention. There is a need to redress the balance through positive stories about workplace diversity and factual guidance for small employers.”      

- Gareth Howell, Managing Director, AXA Insurance

When small businesses were asked which pieces of legislation are relevant to them, health and safety laws were front of mind.


  • Health and Safety at Work Act (23 percent)
  • Data Protection Act (21 percent)
  • Product Safety Regulations (9.5 percent)
  • Employment laws (9.2 percent)
  • Consumer Rights Act (8.7 percent) 

The concern raised by AXA here was not that too many small firms are worrying about these laws, but that too few think they apply to them (given the business profiles included in the sample). 

Microbusinesses, typically sole traders, were least aware of their legal obligations. Only forty percent could recognize common pieces of legislation that apply to their business area. That figure rose to 61 percent for businesses with 1-5 employees, jumping to 94 percent of businesses with 5-10 employees.

Being ‘too small’ or feeling that ‘these regulations apply to big businesses’ were the most common reasons to say they didn’t need to comply.

“We have run research for years, and we have never found justification for the claim that red tape strangles small firms,” comments Gareth Howell, Managing Director, AXA Insurance. “I find it’s often the big business owners who resent regulation most, not their smaller brethren, who just get on with it."

“I’d conclude that businesses are not crying out for cuts in red tape in the UK, they just require clearer information on what does and doesn’t apply to them, and better support on day-to-day implementation. It would be hard to argue that we should rip up equality laws simply because a minority of employers do not understand them fully.”

More information on small business risk and regulations can be found on AXA’s Business Guardian Angel website.

 [1] Survey of 800 small business owners (0-10 employees) in the UK, conducted by AXA Business Insurance in Q4 2017.