Dated: 19 April 2010

Today the IoD renews its call to all political parties to take the issue of over-regulation of business seriously. If we want UK companies to remain competitive, Government needs to step out of the way, and give businesses the freedom to operate. To achieve this we need a culture change in Government.

Using a new approach to measure the cost of regulation, based on the experiences of real people running real businesses, the IoD believes that the cost to business of Government regulation is now running at more than £80 billion a year. This equates to 5.7 pc of the UK’s GDP.

Instead of building up their businesses and creating new jobs, the IoD has found that directors are spending over a month each year handling Government red tape.

What do we want from the next Government on regulation?

• The IoD is calling for a culture change in Government. We need a wholesale review of Civil Service incentives, job evaluation and career progression by whichever party wins the election. Success in most of the Civil Service is still defined by getting as many regulations onto the statute book as possible, regardless of the cost.

• This culture of legislating needs to change. Government must give businesses the freedom to operate. Without that freedom business growth and job creation will be stifled.

A New Approach to calculating the cost of regulation

• Many attempts have been made to calculate the cost to the economy of Government regulation, most based on Government data. Using a new approach based on the experiences of real people running real businesses the IoD has calculated.

• Instead of relying on Government figures, we’ve gone to the heart of the issue and quantified the working hours that company directors and their staff spend each day handling Government regulation. We’ve then costed those working hours using remuneration data.

• The results are startling. The Government claims that the estimated burden of regulation is £13 billion a year. We think the administrative burden of regulation is nearer to £80 billion a year. This figure is the cost of all the hours spent form filling, reading guidance, taking advice and performing other administrative duties associated with regulation. It doesn’t even include the cost to companies of having to adapt their behaviour to comply with regulation.

Commenting Miles Templeman, IoD Director General, said:

“£80bn is effectively being taken out of the UK economy each year due to regulatory paperwork. When the regulatory burden is so large that it typically occupies one employee in every private enterprise in the UK for nearly half a year, it’s obvious we have a problem.”

“This isn’t a debate about diluting protections, because form filling doesn’t protect anyone. This is about getting a culture change in Whitehall. Officials are incentivised to produce legislation. Unless the next Government changes the way civil servants are evaluated and rewarded, businesses will continue to face a large and ever increasing burden of paper work that hinders them from growing and, ultimately, creating jobs.”

Key Findings

Total Costs

• The total burden of administration required by regulation is nearly £80 billion.

• £80 billion represents 5.7 pc of the UK’s GDP.

• An £80 billion cost is equivalent to the UK losing the entire output of the East Midlands. It is also equivalent to the entire economic output of oil rich Kuwait.

Director’s Costs

• Directors are spending 13 hour a month administering Government red tape.

• This equates to Directors having to work continuously from January 1st to February 4th each year on regulation administration.

Business Costs

• Businesses’ workforces spend 73 hours a month on regulation and administration.

• The burden on workforces is equivalent to one member of staff working continuously on regulation for five and a half months to complete a business’s annual regulation administration.

To read our latest report on regulation, click here: £80 Billion A Year