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Growth choked by red tape

September 23, 2006
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(The Mail on Sunday Via Thomson Dialog NewsEdge) THE growing mountain of red tape is threatening the competitiveness of British business as vital medium-sized firms are squeezed and small firms fail to grow, figures this week are expected to show.



At the start of 2002, mid-sized companies accounted for 15 per cent of turnover. This had dropped to 14.6 per cent at the start of 2005, according to Government figures.

The friendly economic climate of low wage growth and high consumer spending would normally mean an increase of small businesses growing into medium-sized ones.

But the medium-sized sector accounted for 11.9 per cent of employment in 2002, unchanged by the start of 2005, and 0.7 per cent of all enterprises by headcount four years ago. This had fallen to 0.6 per cent by the start of 2005.

Stephen Alambritis of the Federation of Small Businesses believes that tomorrow's official figures - the latest comprehensive annual report on the size, location and activities of business - are likely to highlight the squeeze on the middle ranks.

'We are seeing a real bottleneck of small firms progressing to medium-sized businesses,' he says.

'Not only are they worried about the legal and legislative burden of employing people and becoming a more substantial enterprise, but there are also worries about, for example, having a High Street presence as rents are rising fast.' He accuses Ministers of preferring 'quantity over quality' over the highlighting of start-up figures that took little account of the number of business closures.

He says the figure of three out of five businesses struggling within the first three years has remained much the same, despite much-vaunted initiatives.

At the start of 2002, small businesses accounted for 99.1 per cent of all enterprises against 99.3 per cent at the start of 2005; 43.7 per cent of all employment against 46.8 per cent; and 37 per cent of turnover against 36.4 per cent at the start of 2005.

Copyright 2006 The Mail on Sunday.


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