Red tape seen as top barrier to entrepreneurship, says new report

Nearly half of small business owners say that too much red tape is the biggest barrier to entrepreneurship.

New YouGov research commissioned by wealth manager Kleinwort Hambros, looking at barriers to entry for UK entrepreneurs, finds that ‘too much red tape’ was top of the list, with 46 per cent of entrepreneurs identifying it as their main concern. Red tape is an issue particularly important in the financial services and manufacturing sectors, with respectively 65 per cent and 62 per cent of those surveyed perceiving it as the biggest barrier.

Interestingly, entrepreneurs based in London were the least likely to regard red tape as a barrier to entry with just 38 per cent of business owners agreeing that red tape is a problem compared to 50 per cent in the East of England and 48 per cent of business owners in the North.

The study shows that the UK is perceived as an ‘entrepreneur-friendly’ country by 52 per cent of small business owners. London-based business owners were amongst the most likely to regard Britain as an entrepreneur-friendly country with 60 per cent agreeing with the statement, compared to 55 per cent in the Midlands, 48 per cent in the South and 42 per cent in Scotland.

High taxes and lack of available financial support from the government are still seen as impediments by one in three entrepreneurs. However, London-based entrepreneurs were also the least likely to cite lack of government support as a barrier to entrepreneurship with 26 per cent saying it was a problem compared to 34 per cent in the East of England and 34 per cent in the North.

However, the research notes that when it comes to lack of government financial support, the number is lower amongst millennials (24 per cent). A sentiment that can be linked to the fact that the younger generation is more open to private investment than its senior peers, with 17 per cent having raised their initial funding from private investors or businesses, compared to four per cent, eight per cent and nine per cent for those aged 35-44, 45-54 and over 55.

Paul Bentley, head of entrepreneurs at Kleinwort Hambros, says, ‘As a private bank which tends to deal with entrepreneurs at a later stage in their business cycle, we are seeing a lot more successful entrepreneurs coming to us who have received their initial funding from private investors and alternative sources of finance which is clearly an emerging trend. Over the last decade, alternative forms of finance for fledgling businesses is becoming more widely accepted by younger entrepreneurs who are grateful for the support.’

The lack of talent available to fill employee roles was seen as a major barrier for one in five entrepreneurs, a number higher in industries requiring highly skilled employees such as IT and telecoms (31 per cent) and medical and health services (31 per cent). The talent pool in the legal sector seems deep enough however, with only five per cent of entrepreneurs in the sector stating that the lack of talent available was an obstacle to their success.

Finally, London-based entrepreneurs are the most likely to sell their businesses with 57 per cent saying they would sell their businesses tomorrow if the right opportunity came up compared to 49 per cent in the Midlands and 48 per cent in the North.

Bentley adds, ‘London continues to be a focal point for innovation and investment which makes it the ideal place for entrepreneurs to build up and sell their businesses. It is interesting to see from the research that London’s business owners regard red tape as less of an issue than their counterparts in the rest of Britain, which further cements London’s reputation as a great place to develop and grow a business.’

Top five barriers to entry according to UK entrepreneurs

1- Too much ‘red tape’ (e.g. regulation, health and safety, etc.)
2- Difficulty accessing a business loan from financial institutions
3- High taxes
4- Lack of available financial support / grants from the government
5- Lack of talent to fill employee roles

Further reading on red tape

Owen Gough, SmallBusiness UK

Owen Gough

Owen was a reporter for Bonhill Group plc writing across the and titles before moving on to be a Digital Technology reporter for the

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