Red tape crushing manufacturing drive

A staggering 49 per cent of manufacturing bosses say they would be unlikely to set up in business if the opportunity arose again. The figure, part of the 2005 Sage Heartbeat Survey, is up from 18 per cent in 2004 and eight per cent higher than the national average. The survey is an ongoing study into the ups and downs of business life in the UK, conducted by YouGov among more than 2,500 business decision makers, on behalf of Sage UK.

The results emphasise the increasing impact on business of red tape, cited as one of the biggest reasons for manufacturers turning their backs on future business opportunities. 81 per cent of manufacturing bosses did not believe that any elected government would reduce the amount of red tape facing them.

Although business is aware of the importance of fair play and equitable rights, the corresponding increase in form filling and resulting complex legal wrangles is having a disproportionate impact on small companies. In fact, 27 per cent over a quarter of all manufacturers - have considered giving up because of red tape surrounding employment legislation. The growing mountain of red tape has actually stopped 44 per cent from taking on new employees.

The cumulative cost to firms of regulations introduced since 1998 is now 39bn, according to the British Chambers of Commerces Burdens Barometer, published recently. David Frost, Director-General of the BCC, says: British business cannot compete with a 39bn millstone around its neck.

According to the Sage research, UK bosses have particular problems in dealing with issues surrounding poor staff performance, long-term or unauthorised absence and redundancy. 76 per cent of manufacturers feel that the burden of proof on the employer when disciplining staff is too great and over one fifth have admitted not dismissing a member of staff due to confusion and uncertainty over employment legislation. Getting it wrong can prove costly. Last year saw 115,042 employment tribunal claims brought against employers, representing a 61 per cent rise over the past decade, according to figures from the CBI. The average unfair dismissal award (2003/4 figures) was 7,275; sex discrimination 12,971; disability discrimination 16,214 and race discrimination 26,660.

The Sage Heartbeat survey also shows that 63 per cent of UK manufacturers face more competition from abroad, nearly double that of any other industry (average of 32 per cent), and that over two thirds (78 per cent) say they are under pressure to cut prices compared to a UK industry average of 58 per cent.

Andrew Buckley, director Sage Manufacturing Division commented: Through our customer base of over 80,000 manufacturers we understand the issues they face and develop our products accordingly. Sages manufacturing specific software can help British companies overcome the increasing threat of international competition by helping them reduce costs and delivery times, and by giving a greater insight into production planning. The Heartbeat Survey shows it is increasingly important for manufacturers to stay more technologically advanced than the competition.

Buckley adds: While these findings are concerning, they show more than ever that businesses need help in dealing with the multitude of issues that they face in the UK.

In a short interview with Manufacturing&Logistics IT, Buckley said: "Even small businesses can easily implement solutions to help with solving some of these issues." He also recognised that a hurdle that businesses have difficulty in overcoming is finding the time to invest to move from manual to automated systems, as many feel besieged with managing red tape as well as running the business.

When it comes to profitability over half (53 per cent) of manufacturers think it will increase over the next year (the same as 2004) and will invest the most in staff salaries with 68 per cent believing it is very hard to find experienced staff. IT holds the third spot for investment with nearly one third of manufacturers believing competitors are more technically advanced. The desire to invest in R&D dropped by two per cent.

Sage Heartbeat Survey
The Sage Business Heartbeat Survey is based on responses from 2,554 UK business decision makers from the Sage customer database of over 600,000 (300 of which were manufacturers). The survey sample is weighted to reflect the UKs 1.6 million VAT-registered businesses according to DTI figures. 72 percent of all respondents were the owner, CEO, managing director, chairman, founder or general manager.

The Sage Business Heartbeat Survey is a regular study representing the views of UK business owners and heads of business.

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