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Today, the small business website www.startupdonut.co.uk published an article entitled “Red Tape Not a Barrier for Startups, say FSB”. This was subsequently reprinted by another small business site www.is4profit.com, here.
The essence of the article turned around two points in the Manifesto.
First, that I am simply incorrect in my assertion that it takes too long to start a business in the UK and second that it is inappropriate for the Government to imitate the US set-aside for small businesses in federal procurement.
It takes too Long….
Every year the World Bank sponsors a report that attempts to create an objective measure of how easy it is to start a new business in every country in the world. The report is available as an interactive database at www.doingbusiness.org.
One of its principal measures, though not its only measure, is the amount of time it takes to start a new business. The UK ranked #9 in the world in the 2009 report and #16 in the recently published 2010 report, down 7 places.
The report‘s calculation highlights that the primary drag on starting a new business is the time involved interacting with the various government departments. Interestingly, the largest amount of time is spent registering twice at HMRC once for VAT and again in a duplicate, though parallel process, for National Insurance and PAYE. This of course is the same department that now houses the national Business Link website.
Thus apparently without irony, the labour Councillor, Stephen Alambritis, who is also the Head of Public Affairs for the FSB, said that the Government has reduced the barriers to setting up a business.
“They have simplified the obstacles people face setting up a business, but if you want to grow the business, for example, by moving from self-employed to employer status – then it can be more difficult.”
Alambritis also agreed with a Government statement that people can set up a business in the UK in less than a day. “We have one of the easiest regimes in the world for setting up a business, but it is the ongoing regulations that are a burden.”
I am not sure which of his two hats he was wearing when he agreed with the Government, but I would have been a bit surprised if he had disagreed with the government, given that he IS the government. But he is also disagreeing with the World Bank, not me. I merely quote them.
A Department for Business, Innovation and Skills (BIS) spokesman said that research from the European Commission found that it takes, on average, less than a day and costs only £20 to register a company in the UK, compared to a European average of £382.
As for the BIS spokesman, I appreciate his quoting an un-named study which provides such a convenient quote, but I have always found it more useful for public debate to name one’s sources.
The World Bank’s Ease of Doing Business Index is the most highly regarded comparative analysis on this question in the world. My links above let anyone see my source.
Finally, for those of you who think this is a somewhat pedantic conversation, I remind you of this. We must count key indicators as a proxy for larger underlying issues. I am quite mindful that how long it takes to start a business is not the sole measure, and perhaps not even the most important measure of our issue; but it is where it begins and was merely one of many points the Manifesto raises.
If people choose to dispute the Manifesto and the Declaration on such a direct basis on one of its more easily substantiated and less important points, I wonder if its no more than a deflection from their desire not to address the more fundamental issues raised later on.
Mandated Set Asides for Small Business in Government Procurement
“However, the BIS spokesman argued that a similar proposal was considered in the Government-backed 2008 Glover Report and rejected. “The review found that small firms want to compete on an equal basis and on the basis of quality rather than have special treatment,” he said. “They decided that efforts should focus on addressing problems and removing barriers, not on meeting targets.”
I have a great deal of respect for Anne Glover who chaired the group whose report and conclusions are being quoted. And I nevertheless strongly disagree with their conclusion that there should be no set aside. I agree wholeheartedly with the entire set of proposals that the Glover Report does recommend, but it falls apart at the point of voluntary compliance. Facts are facts and the impact that the set-aside has had in the United States has been transforming and, elegantly simple.
It thrusts the responsibility for compliance on industry and in essence forces the large government contactors to bear the burden of proving compliance.
I stand by my contention. Left to its own devices the government will not change its practices and a clear target draws the bright line that it apparently needs to see the issue.
Tags: doug richard, history, manifesto, red tape, startups, uk small business
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3 Comments on “Manifesto response requires a fact check”
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Further comments from Doug re: “The fact is that the 3000 initiatives that have been much quoted over the last few years is a myth” over at http://www.deburca.co.uk/blog/tabid/57/EntryId/223/Entrepreneurs-Manifesto-If-you-are-silent-you-are-part-of-the-problem.aspx
It is the FSB’s comments that require a fact check as they are far from a reflection of reality. There is considerable red tape involved at pre-start up stage for the majority of businesses, not just through interaction with government departments and agencies, but also through local trading standards, environmental health, highways departments, town planners etc. All of which provide barriers and obstacles for prospective start ups to negotiate.
A recent analysis carried out by our organisation into over 22,000 online transactions where entrepreneurs bought specific business start up information from our website, produced the following top 10 list of titles purchased (from an overall list of around 350 titles)
1) Domiciliary Care Agency
2) Childrens Indoor Play Area
3) Recruitment Agency
4) Childrens Day Nursery
5) Coffee Shop
6) Smoothie/Juice Bar
7) Micro Brewery
8 ) Residential Care Home
9) Delicatessen
10)Car Hire
And what is it that’s significant about the contents of this list? The amount of red tape and regulation that is involved in these most popular of business start up ideas BEFORE they can start up.
Now in many ways this regulation is absolutely necessary when you consider the nature of those business operations – childare, food safety, health and safety etc. But the point is that the FSB are incorrect in what they say about start ups facing little in the way of regulatory obstacles.
The problem for the regulators, the government departments, the FSB and those civil servants who recommend and decide on policy for business support and regulation is that the Entrepreneurs’ Manifesto has seriously rattled their cages.
Although one or two of the Manifesto’s proposals are a little over-generalised, its objectives and intentions are certainly thought provoking and hopefully will be a catalyst for some desperately needed change. For that reason it should be supported.