situating small business regulation

Simon Down, Jane Pollard, Paul Richter

sample includes high-growth firms

Sector Firm Approx size Year founded Location

Bio-Business Bio 1 (bio-tech software development) 30 1989 North East

Bio 2 (drug manufacture) 50 2008

Bio 3 (drug delivery technologies) 15 2002 East Mids

Bio 4 (drug development) 52 2007

Environmental Services

ES 1 (waste treatment ) 20 2002 North East

ES 2 (environmental testing service) 40 1999

ES 3 (pollution control ) 10 1995

ES 4 (sustainable energy) 20 2007 East Mids

Security S1 (vision technology) 32 1992 North East

S2 (imaging technologies) 40 2003

S3 (clothing/armour protection) 40 1989 East Mids

Film & Media FM 1 (digital communications) 10 2000 North East

FM2 (design agency) 7 1990 East Mids

FM3 (TV facilities company) 7 1998

burden – employment regulations

• redundancy regulations • force employers to act duplicitously – “I did it as

gently as I could but the legal side of it made me act completely out of character...it made me look really ruthless” (MD - digital communications)

• create distress – “it was the hardest thing I've ever had to do” (scientist/HR manager - drug delivery technologies)

• maternity regulations• assume the worst of employers – “built on a

premise that all employers are bastards” (drug development)

• leave firms short-handed• compensation culture fuels abuse

• dismissal, recruitment...

• issues apply across the sample

• do policymakers have to experience the visceral and emotive nature of complying? Or do small firms need to be included more in decision-making (e.g. FSB’s suggestion for Regulatory Policy Committee Plus)?

‘We want to create a new relationship

between regulators and businesses

where the default setting is trust rather

than distrust’

(BIS, 2011)

if you believe that small firms are consumed by dealing with regulation – think again

• “I don’t notice it in a huge way, if I’m honest.” (Senior Operations Manager, environmental services)

• “It's not like regulation is a huge issue...and we acknowledge you do need a certain level of regulation” (Financial Director, bio-tech software development)

• “it doesn’t take up that much of my time” (Sales Administrator, bio-tech

software development)

• use the existing evidence base that understands firms’ experience and behaviour (and not over-rely on what firms say – perceptions and attitudes)

• use research approaches that look at behaviour as well as attitudes

if you believe government regulation is the main way in which firms feel put upon/controlled – think again

• not just the government, but financial intermediaries• current and future investors have certain expectations of firms (shaping

behaviour):• “the management team believed there was a better way of doing it but the

investors wanted it done a different way;…if they want to do it like that it ties us up in knots, but it’s their money” (drug delivery technologies)

• other firms/parent companiesimposing standards, IT systems, targets, culture:

“I keep thinking that we’re going to plateau out and get used to it but then something else is thrown up” (sustainable energy)

• small firms themselves – self-impositionfirm culture, growth aspirations and expectations (sustainable energy – professionalization)

• “regulation” comes at firms from all directions – beware overestimating the importance of government regulation

summary findings

• yes there are burdens• the usual suspects – employment; uneven enforcement• and some less well-known – inter-organisational

displacement burdens (corporates passing on responsibility/cost)

• there’s government regulation and broader forms of “regulation” (e.g. financial – VCs etc.)

• however, regulation is ordinary and inevitable structural feature that constrains and enables

• regulation can generate growth