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Small Business. Big Impact.

Is red tape really damaging small business?

Small Business. Big Impact.

Small to medium-sized enterprises (SMEs) are essential components of a vibrant economy, providing employment for millions, acting as hubs for innovation and driving competition.  Providing support for innovative SMEs is a key strategic priority for the European Commission through Horizon 2020 and the government has identified SMEs as crucial for revitalising the UK economy. But how can we ensure the dynamism and competitiveness of UK SMEs in this challenging fiscal environment?

Over the last decade, the SBRC has undertaken a range of studies on the impact of regulatory obligations on small businesses for both government departments and professional bodies. The research focused on assessing the implications of the government’s proposal to raise the turnover threshold for audit exemption by surveying small and medium-sized private companies. While the results recommended raising the threshold, they also suggested a significant proportion of company directors believed there were benefits to following the present rules for larger companies. These findings were supported by a further study commissioned by the Chartered Accountants of Scotland (ICAS).

The results of the SBRC research influenced the UK government’s decision to raise the UK size thresholds for accounting regulation to the EU maximum for smaller companies. It is estimated that 3100 medium-sized companies and 1600 large companies were eligible to prepare and file less detailed accounts due to this change, amounting to a total saving of up to £730k per annum.

The department for Business, Innovation & Skills drew on the results in drafting an initial impact assessment of aligning audit and accounting exemptions for small companies. Consequently, new regulations have been introduced which apply from 1st October 2012.
The research method developed by the centre was subsequently used as the basis for regulatory impact assessments in Denmark, Finland, Norway and Sweden.  The SBRC research on this topic had an impact on policy decisions made by the UK and four Nordic countries, and consequently on auditors, preparers and users of financial statements.

Selected publications

  • Kitching, J., Hart, M. and Wilson, N. (2013) ‘Burden or benefit? Regulation as a dynamic influence on small business performance’, International Small Business Journal, published Online First, July 4.
  • Kitching, J., Kašperová, E., Blackburn, R. and Collis, J. (2011) Small company abbreviated accounts: A regulatory burden or a vital disclosure? Edinburgh: Institute of Chartered Accountants in Scotland. ISBN 978-1-904574-80-4 EAN 9781904574804. (http://icas.org.uk/kitching/)
  • Collis, J. (2008) Directors’ Views on Accounting and Auditing Requirements for SMEs, London: BIS.
  • Kitching, J. (2007) ‘Is Less More? Better Regulation and the Small Enterprise’, in S. Weatherill (ed) Better Regulation, Hart, Oxford.

The SBRC

  • The Small Business Research Centre (SBRC) is one of the UK’s leading small business and entrepreneurship research groups. With over 25 year’s experience, the Centre is recognised as a national and international authority on small business issues and related public policy analysis. The Centre’s independent, practical, applied approach has seen it work with government departments and private companies to affect positive changes to the environment in which small businesses operate.

    Centre director Professor Robert Blackburn is editor of the International Small Business Journal and has expertise in primary and secondary data collection, analyses and qualitative and quantitative research.

Partnerships

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