Reported on Tue, 21 Mar 2006

Small businesses in the UK are finding it more and more difficult to contend with increasing levels of paperwork and government regulations, claims a new survey, but a business loan could lead to growth.

Research by bank NatWest found that 19 per cent of small and medium-sized enterprises (SMEs) see excessive red tape as their biggest obstacle for business growth, while only eight per cent of smaller firms felt the same way in 1986.

Two decades ago the biggest challenge facing SMEs was high interest rates, with 24 per cent of businesses revealing their prospects were being damaged. In comparison only one per cent of small firms now see interest rates as a problem.

Other present issues affecting small businesses growth were revealed to be late payment from debtors and increased competition from rival firms, which were mentioned by 12 per cent and eight per cent of SMEs respectively.

Andrew McLaughlin, chief economist at NatWest, explained that SMEs were the "lifeblood" of the UK's economy and praised the secure nature of the current financial situation.

"Britain's small businesses are the engine room of the economy and are often the first to feel the pressures of any cycle. That said, it is clear from these results that the environment for small businesses has benefited enormously from the fact that we now have a much more stable, less volatile economy with lower interest rates and inflation than in the past," he said.

However, Mr McLaughlin added that it was the responsibility of the government to decrease the amount of paperwork that small businesses were required to complete.

He concluded: "The main concern now of course is the burden of regulation and it is clear that both government and business are now focused on the need to fix Britain's productivity record and reducing such burdens would clearly help."

With many SMEs feeling the pressure of having to fulfil excessive regulatory requirements as well as surviving in an increasingly competitive market, a low-rate business loan could allow businesses to invest in new areas to stay ahead of the competition and achieve growth.

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