August 29 2014 Latest news:
Thursday, September 13, 2012
Vince Cable has been busy of late. On Monday he revealed that hundreds of thousands of businesses are to be exempted from health and safety as part of a drive to cut red tape rules.
And he has also unveiled plans for a new industrial strategy, which he wants to be more business-like and strategic in its thinking.
However, plans for a state-backed business bank are “still in their gestation”, he acknowledged yesterday.
But will the initiatives help free up firms to concentrate on winning more business and will the new industrial thinking help to deliver the growth which is still proving so painfully elusive?
Under the plans, more than 3,000 regulations will be scrapped or overhauled, so that shops, offices, pubs and clubs will no longer face “burdensome” health and safety inspections.
Legislation will also be introduced which ministers say will protect business from “compensation culture” claims.
Officials described it as a “radical” plan to curb red tape.
From next April, the government intends to introduce binding new rules on both the Health & Safety Executive and local authorities that will exempt hundreds of thousands of businesses from regular inspections.
Firms will only face health and safety inspections if they are operating in higher-risk areas such as construction or if they have an incident or track record of poor performance.
The government has also said it will introduce legislation next month to ensure that businesses will only be held liable for civil damages in health and safety cases if they can be shown to have acted negligently.
Dr Cable said the aim in these tough times is to help businesses focus all their energies on creating jobs and not being tied up in unnecessary red tape.
And it is not just health and safety rules which could be scrapped. The government is also looking to simplify audit rules, reducing the paperwork required for businesses filing their accounts.
But will it work?
Ian Mayers, a partner specialising in regulatory matters at Mills and Reeve, said: “The bottom line is that I think anything is better than nothing as there is far too much regulation for business. That’s the way the country has gone over the last decade or so.
“But most of the proposals will probably relate to smaller businesses and that will create a lot of frustration among the big boys, who actually tend to be more compliant with the regulations. A lot of the health and safety stuff has become so voluminous as a result of European Union influence.
“We had a very good structure on health and safety regulation, and what’s happened? It’s been overlaid by things out of the EU.
“The government wants to help new businesses start up and get off the ground, so if there is less red tape that will help. But I think it’s highly questionable how much effect, if at all, it will have on the current economic state.
Anders Rasmussen, a partner at Grant Thornton in Norwich, welcomed proposals to reduce the auditing and reporting requirements facing many businesses and allowing them to make a commercial decision about whether or not to have a statutory audit, which he said could be of particular help to farming and property companies.
“To be classed as small under the Companies Act, businesses have to satisfy any two out of three criteria, they should have turnover below £6.5m, total assets below £3.26m or an average of 50 employees, that entitles a company to file abbreviated accounts,” he said.
“The problem, until this new announcement, was that to take advantage of audit exemption, companies specifically had to meet both the turnover and assets test.
“The biggest losers tended to be farming companies and property companies, both of which typically have fewer employees, and lower turnover, but significant assets.
“Under the new rules, the eligibility for audit exemption is the same as that for being a small company, so many of these businesses will now qualify, as they can easily meet two out of the three criteria.
“The other key change is that subsidiary companies will be able to take audit exemption if their parent company guarantees all their debts. In theory this could mean some fairly chunky businesses not having an audit done, but in reality, I question how many parent companies will be prepared to give a guarantee.
“Plus, if the subsidiary is sizeable, the likelihood is that it will still need some form of audit work done to satisfy the requirements of the group auditors.
“Nevertheless there is no doubt that this represents a potentially significant reduction in red tape and hence cost for a number of businesses and is therefore to be welcomed.
Robert Colman, Howes Percival’s Corporate Finance partner, said he was keen to see the business banks plans bear fruit.
“These proposals build on a lot of what is happening organically in the market already,” he said.
“We already work with the likes of Handelsbanken in Norwich as well as the bigger banks.
“Our job is to help pull together the funding that local companies need, and that can also include introducing private equity houses and individual investors who may have specialist expertise in key sectors, which is one of Vince Cable’s points.
“These private equity specialists are not only lending money but also providing their expertise, sometimes in exchange for a long term stake in the business, but not always. High growth businesses can benefit hugely from this approach.
“Companies still need to be working closely with their bank.
“Locally, the banks are still very much involved in most of the lending and the majority of the deals we’ve done recently have included bank financing.
“It is often the case that the bank just can’t provide the full amount that the business is after.
“So businesses have been quite creative already and have welcomed alternative solutions but they will certainly welcome further attempts to improve the flow of credit.”
Caroline Williams, chief executive of Norfolk Chamber, said: “Anything that makes life simpler for businesses has got to be good news.
“The problem is the sheer amount of regulations.
“Employment law is the biggest one and the one most businesses are worried about. As a small business you will always worry if you are getting it right, and that might stop you taking on that extra person.
“There’s a real fear factor, if you are worrying all the time about ticking boxes, that might stop you going out there and driving the business forward.”
A Norwich-based business which started as a “man with a van” operation is eyeing further expansion after seeing its predicted turnover increase from £6,000 to £340,000 within five years.