Small businesses in devolved regions hit harder by government policy

New research reveals that government policy is more costly for SMEs in Wales, Scotland and Northern Ireland than it is in London.

Recent government policy has put a heavier burden on small businesses in Wales, Scotland and Northern Ireland than it has on SMEs in London.

The Federation of Small Businesses (FSB) carried out research revealing that the cost of regulation and taxes for SMEs increased in all devolved regions and dropped by a small amount in the capital.

The average SME had an annual cost of £481,000 which is the same as last year but up by £61,000 (14.5 per cent) compared to 2011.

Businesses in Wales (15.2 per cent), Northern Ireland (14.9 per cent) and Scotland (14.7 per cent) have taken on a higher cost because of these government measures, as analysed in the annual Impact of Government Policy Index. Meanwhile, the rise in London was a lower 13.7 per cent.

The index remains at a record high due to rising business rates and government policy in areas such as pensions and insurance – they more than offset the reductions in corporation tax.

Construction sector suffers the most

Researchers at the Centre for Economics and Business Research (Cebr), who compiles the index, said that the composition of the economy in the devolved regions accounted for the outsized increase.

According to the data, the construction sector has suffered the most, with a 28 per cent increase in policy-linked costs because of rising wages and labour taxes. Manufacturing costs are up a fifth in only two years.

Although, the increase in the minimum wage may also be responsible for some of the impact as many London workers are already above the threshold.

It’s also worth noting that devolved regions have significantly fewer companies than the capital. London has 1,563 businesses per 10,000 people, while the figure in Scotland is 735, 774 in Wales and 897 in Northern Ireland.

Cebr has been compiling the index since 2011 based on the impact of government policy on the average business that is VAT-registered (that’s around 2.6 million).

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Anna Jordan

Anna is Senior Reporter, covering topics affecting SMEs such as grant funding, managing employees and the day-to-day running of a business.

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