12th April 2023

Reduction of red tape for businesses

Piers Larbey

Partner

In an effort to boost productivity and stimulate growth, the government recently announced plans to release thousands of UK companies from regulatory reporting requirements.

Presently, small businesses are typically exempt from certain regulations, but medium-sized businesses (i.e. those with between 50 and 249 employees), still spend an average of over 22 staff days each month dealing with regulations, and more than half of all businesses view regulation as an operational burden, according to the UK Business Perceptions Survey 2020.

To alleviate this burden, the government intends to extend the exemptions to companies with fewer than 500 employees for future and revised regulations. This means that an additional 40,000 businesses will be freed from the bureaucracy and associated paperwork that can be costly and cumbersome for all but the largest firms. The exemption will be applied proportionally to protect workers' rights and other standards while reducing the burden on growing businesses.

While regulatory exemptions are frequently granted to small and medium-sized enterprises (SMEs), which the EU defines as having fewer than 250 employees, the UK can adopt its own approach and exclude more firms, in this case, those with fewer than 500 employees. The new threshold will apply to all new regulations under development and those currently under review, including retained EU laws.

The government will also consider expanding the threshold to companies with 1,000 employees after assessing the impact of the current extension.

This is the first stage in a series of reforms proposed by the government to help ensure that UK business regulations are tailored to the UK economy.

The reforms are intended to leverage the UK's freedom since exiting the EU to remove bureaucratic and burdensome regulations while simplifying compliance with existing rules, ultimately saving valuable time and money for businesses.