The UK economy is losing an estimated £41 billion a year to red tape despite continued government promises to reduce the amount of time and money SMEs spend on compliance, a survey by the Forum of Private Business (FPB) has found.

The FPB has concluded that the average SME spends more time on compliance now than in 2013. While the amount of money being spent on external consultants has fallen by 5.7%, salary rises have kept the cost of compliance rising since 2011 at a rate of 8.5% a year.

The biggest compliance costs for FPB members are:

• employment law
• tax
• health and safety.

The study also highlights the problematic nature of the changes to flexible working, in particular shared parental leave and auto-enrolment, when it comes to costs. Businesses with more than 50 employees have a seen an increase in time spent on holidays and salaries.

Other key findings from the study are:

• the salaried cost of compliance equates to £14,900 per company
• internal compliance costs have risen by 13%
• the cost of compliance is 10 times greater for small firms than large companies.

Ian Cass, managing director at the FPB, said:

“Our research shows that the deregulation agenda has not been effective as the legislation removed from the statute books has been cancelled out by a small number of legal changes and a reluctance of businesses to change processes while non-compliance penalties escalate.

“Our members tell us that excessive red tape is a drag on productivity and there is a clear need for accelerating the deregulation agenda and incorporating tax compliance into any new initiatives.”