Regulation and red tape are the bane of business, or at least that’s what it can feel like. Noone likes having to go out of their way, seeing energy and resources sucked away from profitable activity, just to tick a few boxes. Whether its questions of health and safety, tax, employment and immigration administration or any one of a host of other niggling little obligations that are part and parcel of running a small business, regulation gets a thoroughly bad press.
But research published by the renowned business scholar Professor Simon Down from Anglia Ruskin University, Cambridge, has shown that, contrary to what most of us think on a day-to-day basis, regulation is often an unrecognised booster for business.
Professors Down cites the example of airport security regulations which are self-evidently highly regulated. Government-level concerns over threats to airport security and immigration represent business opportunities in their own right. In this example, high-tech security firms are provided with a reliable and highly specified market for their products and services. Other examples Down cites to make his case include the tax-price setting of land for landfill and the regulations concerning the Feed in Tariffs governing the generation of solar power.
Down’s contention is that business regulation is not the one-size-fits-all negative that most of us see it as on a day-to-day basis. Rather, he insists it is regulation that makes any form of legal business activity possible, whether that is in terms of a stable market, the absence of racketeering, an agreed framework for the settlement of debt and even the safe transit of goods from one place to another.
Research elsewhere supplied by Hiscox has shown the degree to which the UK’s economic prosperity is reliant on small and medium-sized businesses. The Hiscox data map breaks this down by sector and by region. This is a methodology largely in key with that of Down who was particularly minded to stress that it is SMEs who feel regulatory burdens most painfully. Larger concerns can afford to carry staff dedicated to compliance issues of one sort or another, whereas in SMEs those tasks are likely to fall to front line staff.
Down’s argument is maybe not one that will find favour with anyone struggling to get to grips with their VAT return or to sort out the intricacies of their formal status as a Tier 2 visa sponsor. There are always numerous administrative and bureaucratic elements to being in business that few, if any, truly relish. But whilst it is glaringly easy to see such requirements as some sort of a black hole that simply sucks life and energy out of a small business, it is also to miss an important point. To label all such red tape as a nuisance and a bar to business is a dangerous and misguided oversimplification.
The business of business depends wholesale on an established set of codes and structures that everyone, clients, suppliers, manufacturers and administrators alike, can all rely on. With no regulation there is only the law of the jungle. And whilst jungles don’t involve much red tape they are universally wild, dangerous, unpredictable and unprofitable places.