William Sargent looks at how SME's are affected by regulation.

 In his 2006 book How to Label a Goat, Ross Clark pokes fun at rules that appear to go too far in trying to regulate UK businesses.

His example of 45 pages of instructions on 'how to correctly label a goat (or sheep)' is just one case of how out-of-hand regulation can occasionally get if left unchecked.

But while examples of heavy-handed regulation can make amusing reading, for most small business owners they are no laughing matter. Regulations that are too heavy-handed, or poorly conceived, can impact on the finances of small businesses - affecting the productivity, imposing unwanted costs, and in some cases stifling innovation.

While SMEs can be more flexible and innovative than their larger counterparts, their small size makes their financial position especially vulnerable to regulatory burdens. "Using a hammer to crack a nut" is the phrase often cited by small businesses when they talk about the effects of poor regulation.

As a business owner, I've spent countless hours dealing with regulations over the years.  Along with many firms, I've found cases of regulations that are confusing, burdensome and out of touch with the day-to-day reality of running a business.

But along with an understanding of what constitutes bad regulation, I've always believed that good regulation is vital to business success.

Good regulation provides many important safeguards - for the environment, businesses, consumers and society. Regulations work well when they are proportionate (i.e. not 45 pages on how to label a goat), targeted to the problem and introduced only when absolutely necessary.

While the UK has amongst the lowest regulatory burdens in the world, we have no room for complacency. The current administrative burden on UK businesses is around £14bn a year and most firms still feel there is too much unnecessary red tape.

The government's response to this issue has included the establishment of a red tape busting agency, the Better Regulation Executive (BRE), which I lead.

This month is the second anniversary of the BRE, and while it's early days yet, I believe we are beginning to have an impact on the regulatory environment in the UK.

In 2005, 19 government departments signed up to the BRE's target of cutting red tape for business by 25 per cent, or £3.5bn, by 2010. Cuts to red tape made in the last 18 months are already saving an estimated £800 million per year.

A report released in December, Delivering Simplification Plans, outlined progress on around 288 measures to cut red tape. A few of the practical changes highlighted in the report included:

Employment Law (www.businesslink.gov.uk):
* Paperwork on employment areas as broad as contracts, tax and redundancies can now be submitted on line at Businesslink, with an estimated admin saving of £365m a year
* Employers can download statements setting out terms for new starters - allowing them to complete the task in a third of the time.

Health and Safety (www.hse.gov.uk):
* Workplace accidents can now be reported by phone, saving time writing reports, saving £16.6m a year in admin costs.
* The number of health and safety forms has been cut by more than half, from 120 to 55.
* The HSE now has clearer, more helpful advice on all health and safety rules (with tailored examples at www.hse.gov.uk/risk) with an estimated admin saving of £29m a year.

Planning and administration (www.planningportal.gov.uk):
* Planning applications can be submitted online with one national planning form - saving businesses around £120 per application.

Tax (www.hmrc.gov.uk):
* Employers no longer need to pay their employees' tax credits - saving time on paperwork and record keeping.

Feedback and practical ideas from businesses continue to be crucial to driving forward the BRE's work to cut red tape.

We want businesses to visit the Better Regulation portal (www.betterregulation.gov.uk) to submit ideas and suggestions. Every idea is being carefully considered and responded to by government. Already a number of ideas have been taken forward and turned into practical changes to lighten the load on businesses.

We are continuing to work hard to strip away unnecessary or outdated regulations and, with support from the business community, are determined create the best possible conditions for business success.

Working towards better regulation - case studies

Health and safety without the hassle
Health and safety is widely considered to be the largest admin burden for UK businesses. Employers often find it difficult to work out what health and safety rules mean for their workplace, and where to go for good, straightforward advice.

Employers can now find much of the guidance they need in one place at www.hse.gov.uk/risk. The site tells them what the risks are for their industry, what practical steps they can take, and what 'good enough' looks like. Sample plans are given for businesses as diverse as butchers, hairdressers, bricklayers, off-licenses and estate agents.

"I have now completed my risk assessment and it took a fraction of the time I had spent on researching the topic."
Convenience store owner, Birmingham

"HSE's example risk assessment for office cleaning is clear, simple to follow and focused on significant risks. It also shows that it needn't cost a lot of time and money to do a good risk assessment."
Service industry manager, West Midlands