Is it time to cut the red tape?
There is a modern conundrum: we live in the most technologically advanced age in history, with instant global communication and business being done 24/7, yet studies and reports from around the world continue to tell us that the pace of business is slowing down, and not speeding up. Is it the governments of the world that are at fault in tying us all up in red tape?
Do companies themselves share some or any of the blame? We sat down with Mark Rowley, Hanover Fox Associate, to gain insight on the issue of red tape in the 21st century, and if anything could (or should) be done about it.
“From the point of view of the entrepreneur, who’s looking to set up an idea and take it to market, technology is a double-edged sword. It’s a fantastic thing to be able to log onto the government website, pay £14.99 and set up a limited business. But technology also creates data and big data, and once you start getting into organisations and governments and trading platforms, by definition you trip into red tape. You have what is referred to as instruction creep.”
There was a consultation by the government back in July from the independent task force on Innovation, Growth and Regulatory Reform. To set higher principles whilst reducing red tape.
“Regulation is there, and red tape is there to protect certain people, certain processes and certain industries. And that’s absolutely fine. It needs to be there. I think an element of self-certification and self-regulation is useful. That self-regulation will hopefully, by definition, weed out the poor performers from the good performers, and the quality applicants and the quality staff will want to work with the quality businesses.”
There is a counterargument that what business wants is to remove red tape. But what that really means is to remove safeguards, diminishing health and safety, employee benefits and more.
“We have come a long way in creating fair, equal environments for individuals within companies, and we do not want to go backwards from that. I think most recognise the benefit of the various legislations and laws that have taken place over the past 10 years in particular. It’s now ingrained in companies, how they recruit and how they manage their teams. But I think from a safeguarding point of view, I can see the argument that there’ll always be some individuals who will look to cut corners and those safeguards are essential to prevent this.”
Many argue that red tape and bureaucracy suits companies of certain sizes, and it is possibly in the interest of larger companies to maintain high levels of red tape.
“I think probably if you’re a start-up looking to get the business going, maybe the regulation needs to be a lighter touch for a period of time. Let’s say, two years. Once the business gets established and, on its feet, and making money. Or maybe three years, or when it hits a certain turnover figure. So, I think we have to look at the state of companies and their maturity, and their markets before an overriding red tape policy document is put out to business.”
Richard Foster, senior director at McKinsey’s in New York, highlighted an interesting issue — “Bureaucracy comes with growth”. This was based on a study of a thousand large companies, which pointed out that none of the survivors over the 40-year period this study was done, outperformed the stock market.
“If your company is in the healthcare sector, or it has a product or a service that has an insurance offering behind it, it’s an absolute minefield to take a business to market. You have so many controls from the FSA and compliance ruling. But for the individuals that are in the company as well as the company itself, it can take an absolute eternity. Bureaucracy does come with growth, and as you get bigger how you protect that data has so much red tape attached to it. You end up protecting internal information and activity so much that it can be quite easy to lose your way in the external market, particularly on the international stage.”
One recent survey highlighted 25% of entrepreneurs saying that regulation was the biggest single inhibitor to growth. Another report from the Rand corporation found small and emerging companies carry a disproportionately high burden of all red tape.
“Businesspeople who are launching a business, they’re not red tape specialists, they won’t be holding their hands up because they enjoy red tape and bureaucracy, that’s the last thing on the list they want to get involved with. They know they have to do it, otherwise, the authorities will come down on them like a ton of bricks. And in a way it’s almost like buying a funeral. You don’t want to buy the funeral, but you know you have to.”
We have seen the issues with Brexit, making countries adopt more pro-business reforms. And, in other words, cutting the red tape to make business easier to attract inward investment.
“Ireland many years ago when the Celtic tiger was being promoted made dramatic changes to their tax structure for corporations and businesses, and that was a great success. So many of the big companies have positioned themselves over there for a European central point of view, and it’s remained there even though there have been changes and it’s not quite as attractive as it was in the past. And I believe I’m right in saying that the red tape and bureaucracy in Ireland is not quite to the level of us here in the UK.”