Playing by the Rules

Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Playing by the Rules How to reduce the cost and time small businesses spend on regulatory compliance

March 2026

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Acknowledgements This report was authored by Kristina Grinkina, Senior Policy Advisor for regulation. Special thanks to FSB’s policy, government affairs, and media and communications teams, in particular: Jo Tacon, Media Advisor; Tom Blenkinsop, Senior Government Affairs Advisor; and David Hale, Government Affairs Director. Special thanks also to colleagues in devolved nations.

This report would not have been possible without the FSB members across the UK who participated

in this research, generously taking the time out of running their small businesses to complete our survey, attend focus groups, and participate in interviews.

The quantitative research was carried out by Verve – the market research agency responsible for administering the survey. The report was designed by Cactus Design Limited – a small business based in Wales.

Who we are The Federation of Small Businesses (FSB) is the UK’s grassroots business organisation. We are a cross-party non-profit body that represents small business and self-employed members in every nation and region.

For over 50 years, we have been the authoritative voice on policy issues affecting the UK’s 5.7 million small and medium businesses, microbusinesses and the self-employed. FSB is the UK’s largest business group and leading business campaigner, focused on achieving change which supports smaller businesses to grow and succeed.

We also provide our members with a wide range of vital business services, helping them to start, run, and grow successful businesses through high quality protection and support. This includes 24/7 legal support, financial expertise, training and events, debt recovery and employment/HR advice – alongside a powerful voice heard by governments at all levels. fsb.org.uk

Our local, national and international campaigning helps shape policy decisions that have a direct impact on the day-to-day running of smaller businesses. We work for their interests through research and engagement with our members, and by effective campaigning – influencing those in power through policy analysis, government affairs, and media and public relations activity.

Our policy and advocacy work starts with our expert team in Westminster, which focuses on UK and England policy issues, the UK Government, Parliament and the media. Further to this, our teams in Glasgow, Cardiff and Belfast work with governments, elected representatives and media in Scotland, Wales and Northern Ireland.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Contents Infographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Small business engagement with regulators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Small businesses’ experiences of engaging with regulators . . . . . . . . . . . . . . . . . . . . .10 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Improving small businesses’ experiences when engaging with regulators . . . . . . . . . . . . 17 Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 The current regulatory environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Regulation that small businesses find helpful . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Regulation that small businesses find burdensome . . . . . . . . . . . . . . . . . . . . . . . . . .31 Regulatory fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Impact of the regulatory burden on small businesses . . . . . . . . . . . . . . . . . . . . . . . . . 39 Administrative and financial impact of compliance with regulatory requirements . . . . . . . . 41 Opportunities for regulatory reform and growth . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Benefits of reducing the regulatory burden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Potential to reform the regulatory system as a whole . . . . . . . . . . . . . . . . . . . . . . . . 49 Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Key findings 40%

£9bn

of small businesses say that they engage with four or more regulators

could be saved in compliance costs if the regulatory burden were to be cut by a quarter

2 full days

28%

How much time spent on compliance the average small business would get back if the regulatory burden were to be cut by a quarter

of small businesses would like to see more investment in the small business user journey from regulators

50%

32%

of small businesses say that they would reinvest the savings from reducing the cost of compliance back into the business

of small businesses say that they would invest in staff training or upskilling if their cost of compliance were to be cut

70%

32%

of small businesses would like to see simplified regulatory requirements for small businesses fsb.org.uk

The proportion of requirements that small businesses believe could be cut without compromising policy objectives 4

Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Foreword Regulation is a loaded word when it comes to small businesses. On the one hand, regulation – in theory, at least – provides a backbone of fairness within the business world, giving small firms the opportunity to compete with their larger counterparts within a defined set of rules, and reassuring customers that the products and services they buy are safe and trustworthy.

A joined-up approach from the Government would be highly helpful, if perhaps easier said than done. If the Government were to bring groups of regulators together and conduct theme-based reviews of regulation, rather than reviewing regulations individually, this could be an enormous step forward in progressing towards the 25 per cent reduction target, for example.

On the other hand, of course, are the costs of regulation – not just the financial cost to businesses, but also the cost in terms of time spent trying to puzzle out an answer from a dense thicket of highly complex and often apparently contradictory rules.

Our research indicates that the annual cost of compliance for small and medium-sized businesses is a staggering £36 billion, and uses up 379 million hours. If those enormous totals could be reduced by the 25 per cent target the UK Government has set itself, some £9 billion in financial cost and 95 million hours could be returned to small businesses to invest in their operations and futures.

Regulators themselves rather obviously also have a huge part to play. Their commitment to helping small firms with compliance needs to be more than lip service, and tailored resources – which do not assume that the business in question has an inhouse compliance team – are a must, alongside real-world examples and clear guidance around any considerations arising from case law. A customer service mindset, based on genuine care for small businesses’ needs and capacities, would also be an enormous help, so small firms are not left in limbo after submitting queries.

Then there is the cost in terms of lost opportunities: the small firms deterred from bringing a fresh eye and a sense of innovation to areas where the existing web of regulation means that only larger businesses, with their greater in-house compliance resources, are realistically able to compete. Meanwhile, the pernicious growth of regulation in some industries is gradually forcing many smaller players to retreat from the market, reducing consumer choice and driving up costs.

No one is pretending that tackling this issue will be a simple matter. The regulatory landscape is already crowded and complicated, while previous Governments have not matched their lofty promises about pruning back overly burdensome rules with concrete action. Initiatives on numerous different levels are very badly needed, in order to reduce the burden regulation places on small businesses.

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Improving the regulatory situation small firms are required to operate in will be no easy task, but the potential return on investment – millions of hours and billions of pounds returned to the small business community to invest in growth and innovation – makes it more than worth the effort.

Tina McKenzie Policy and Advocacy Chair, Federation of Small Businesses

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Recommendations

Devolved Governments in Scotland, Northern Ireland and Wales should consider how these recommendations can be applied to regulators and regulations in their relevant devolved policy areas.

Improving small businesses’ experiences when engaging with regulators Regulators should: • Expand consideration of the Growth Duty so it covers not only the SMEs that they regulate, but also those that that may be consumers of the products and services that they regulate. This is especially pertinent for utility regulators. (p.24) • See it as part of their Growth Duty to try and minimise any uncertainty for regulated entities created by emerging caselaw in the advice and guidance that they give. (p.24) • Be required to have a customer service mindset with respect to those that they regulate, to better assess and implement services that are aligned to small business needs and improve their user journey. (p.26) • Prioritise resources towards regulatory approaches that benefit and encourage a broad range of businesses to grow, rather than focusing on policies and procedures which may benefit a few well-resourced firms. (p.26) • Be encouraged to establish a model for regulator collaboration similar to the Digital Regulation Cooperation Forum (DRCF), where responsibilities or areas overlap. (p.24)

• Clearly outline any policy they have with regard to investigations and enforcement, including outlining how their approach on regulatory action is proportionate according to business size and risk. (p.26) • Consider regulatory fees as part of the overall cost of regulation on businesses. (p.38) The Department for Business and Trade (DBT) should: • Include SME development, including start-ups and self-employment, as part of the drivers of economic growth in the Growth Duty. (p.24) • Require regulators to publish how they comply with the Regulators’ Code on an annual basis. (p.25) • Seek commitments from both Companies House and HM Revenue and Customs (HMRC) to apply the Growth Duty to all of their activities, and include both organisations within scope of the target to cut administrative burden for businesses by 25 per cent. (p.25) The UK Government should: • Publish guidance for regulators where their duties and objectives overlap. (p.25)

• Publish small business-specific guidance, together with illustrative examples about how to comply. (p.25)

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Reforming the regulatory system as a whole The UK Government should: • Bring groups of regulations together and conduct Thematic Regulatory Reviews, rather than reviewing regulations individually, with the aim of reducing the regulatory burden within each theme by at least 25 per cent (p 54) • Amend the Better Regulation Framework to ensure that any decision to regulate is appropriately scrutinised, removing the equivalent annual net direct cost to businesses (EANDCB) threshold of £10m (p 54) • Include legislation which is set to be implemented within this Parliament as part of its promise to assess and reduce the administrative regulatory burden (p 55) • Publish a register of regulations to help small businesses identify which regulations are relevant to them and help them comply with any requirements. (p 54) • Maintain and strengthen the role of the Regulatory Policy Committee (RPC), including by requiring regulators to submit an impact assessment to the RPC for scrutiny prior to implementing any new regulatory requirements on businesses. (p.54)

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The UK and Devolved Governments should: • Work together with businesses across different sectors to identify regulations which require businesses to report and comply across borders, with the aim of making them as simple and seamless as possible to comply with. (p.55) Government departments should: • Be required in the simplest form to demonstrate the steps a business would need to take to comply with any proposed requirements, as part of the Small and Micro Business Assessment (SaMBA) at the options assessment (OA) stage. (p.54-55) • Be required to publish Options Assessments (OAs) where a decision to regulate has been taken forward. (p.54) • Establish a separate target for a reduction in the administrative regulatory burden specifically for small businesses alongside the SME procurement target. (p.55)

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Small business engagement with regulators Regulators operate across all sectors of the economy and have a significant role to play in designing, implementing and enforcing regulatory requirements.

According to a House of Lords report, there are around 90 regulators, operating across a range of sectors and policy areas including, financial services, data protection and pensions.1 The same report also emphasises the complex nature of regulation, and Parliamentary committees’ limited ability and resources to monitor their performance.

This substantial number of regulators means that many small businesses need to engage with multiple regulators to run their business, depending on whether they have employees, and depending on the products and services that they offer. Our research shows that the majority (70%) of small businesses say that they engage with two or more regulators for the running of their main business, and 40 per cent engage with four or more regulators.

Given this high level of engagement, regulators should be attuned to the needs of small businesses, including consideration of small businesses’ ability to comply when designing, implementing and enforcing regulatory requirements, and ensuring that small firms are able to approach regulators when they require assistance with compliance, alongside tailored advice and services. Our research finds that small businesses’ ability to comply is not only dependent on the regulations themselves, but also on the way that regulators help small businesses comply, particularly where there are complex or conflicting requirements. Uncertainty around the steps a business needs to take to comply can lead to wasted resources, and to overreliance on external advice, which can often be financially prohibitive, particularly for smaller businesses with fewer financial reserves.

Figure 1: Small business engagement with multiple regulators for the running of their main business 35%

FSB regulation survey 2025 30%

30% 25%

23%

20%

18%

15% 10%

11%

11%

5%

5% 0%

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1% 0 regulators

1 regulator

2-3 regulators

4-5 regulators

6-7 regulators

8-9 regulators

10 or more regulators 8

Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Our research shows that nine in ten small businesses (89%) say they engage with at least one regulator for the running of their main business. Out of small businesses that say that they engage with at least one regulator, the most common regulators are Companies House (57%), local authorities (45%), and the Information Commissioner’s Office (ICO) (44%). Out of small businesses that cite “other regulators” (18%), the most common ones are the Insolvency Service, the Department for Environment, Food and Rural Affairs (DEFRA), and Ofsted, as well as professional services regulators such as the Institute of Chartered Accountants in England and Wales (ICAEW) and the Security Industry Authority (SIA).

Our research shows that there are also some sectoral differences in engagement with regulators. Small businesses in the wholesale and retail sector are more likely to say that they engage with their local authority (56%) than those in the professional, scientific and technical activities sector (36%), which can be in part explained by certain rules that are in

place, such as retailers having to engage with their local trading standards.2 Similarly, small businesses in the professional, scientific and technical activities sector are more likely to engage with the ICO (57%) than any other sector (40%), as they are more likely to deal with large amounts of personal and sensitive data.

Types of regulators that small businesses engage with also vary by size of the business, likely due to larger businesses having more employees, and a higher likelihood of a business having premises.

Small businesses with employees are more likely to say that they engage with the ICO (45%) than those with no employees (39%). Similarly, small businesses with 10 or more employees are more likely to say that they engage with the Health and Safety Executive (HSE) (54%) than those with one to nine employees (34%). Small businesses with 10 or more employees are slightly more likely (48%) to say that they engage with The Pensions Regulator (TPR) than those with one to nine employees (42%).

Figure 2: Main regulators small businesses engage with for the running of their main business FSB regulation survey 2025 57%

Companies House 45%

Local authority

44%

Information Commissioner's Office (ICO) 34%

The Pensions Regulator (TPR)

33%

Health and Safety Executive (HSE) 20%

Environment Agency 17%

Trading Standards 11%

Financial Conduct Authority (FCA) Scottish Government regulators

7%

Food Standards Agency (FSA)

7% 5%

Advertising Standards Authority (ASA) Payment Systems Regulator (PSR)

4%

Welsh Government regulators

4%

Ofcom

3%

Office for Product Safety & Standards (OPSS)

3%

Northern Ireland Government regulators

2%

Care Quality Commission (CQC)

2%

Competition and Markets Authority (CMA)

1% 18%

Other 12%

None of the above / not applicable 0%

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10%

20%

30%

40%

50%

60%

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Small businesses’ experiences of engaging with regulators Small business perception and experience of regulator engagement is a good indicator of the health of the regulatory environment. The ability to understand regulatory requirements and the advice that regulators give small businesses is key to supporting small businesses with compliance, as small businesses often rely on regulators as one of their main sources of advice. Somewhat positively, our research shows that more small businesses agree (41%) than disagree (29%) that the regulators that they engage with help them to understand their regulatory obligations, and more small businesses agree (40%) than disagree (26%) that they have confidence in the advice that regulators give them.

However, our research also shows that this view differs according to the amount of time and money that small businesses dedicate to compliance. Small businesses that spend up to 40 hours per year on complying with regulatory requirements are more likely (47%) to say that regulators that they engage with help them to understand regulatory obligations than those who spend 100 hours or more (37%). This is also the case for financial cost of compliance: small businesses who say that they spend up to £1,000 a year on complying with regulatory requirements are almost twice as likely to agree that regulators help them to understand their regulatory obligations (50%) than those who spend £7,500 or more (28%). In addition, those that do turn to external advice are more likely to pay more for it if the advice provided by the regulator is not sufficient, illustrating a relationship between the cost of compliance and ease of compliance, as well as highlighting the role of regulators in helping to reduce that burden.

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Small businesses in our research are more pessimistic regarding to the accessibility of guidance and information that regulators provide. Our research shows that more small businesses tend to disagree (40%) than agree (30%) that guidance is easy to locate, and a similar proportion of small businesses disagree (40%) than agree (27%) that guidance is easy to understand. In each case, small businesses are more likely to be pessimistic about the ease of locating and understanding guidance when they say that they spend more than 100 hours a year complying with regulatory requirements, increasing to 56 per cent of small businesses that say that they find guidance difficult to locate, and 58 per cent of small businesses that say that they find the guidance difficult to understand.

With that said, we recognise that some regulators have sought to produce guidance that is more accessible for small businesses. For example, the ICO has established a dedicated hub for small business advice,3 and The Insolvency Service has introduced its director education hub,4 which includes bitesize information to help businesses owners understand their obligations.

Interestingly, there is more of an equal split between small businesses on their perceptions about regulators’ websites and online systems. While there is a slight difference in the proportion of small businesses that disagree (38%) than agree (30%) that regulators’ online systems are easy to use and submit information to, an equal part of small businesses agree and disagree (both 30%) that regulators’ websites are useful and relevant for their business.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Our findings also suggest that the biggest issue for small businesses when engaging with regulators is their approach to helping small businesses, particularly in relation to resolving complaints or concerns. Four times as many small businesses

disagree (40%) than agree (10%) that it is easy to resolve complaints or concerns with the regulators that they engage with, and a similar proportion disagree (41%) than agree (14%) that they get a quick response when they need help.

Figure 3: Small business views on the regulators that they engage with FSB regulation survey 2025

Regulator helps me to understand regulatory obligations

41%

28%

29%

3%

I have confidence in advice they give me

40%

31%

26%

4%

Guidance they provide is easy to understand

27%

30%

41%

2%

Guidance is easy to locate

30%

28%

40%

3%

I get a quick response when I need help

14%

It is easy to resolve complaints/concerns

10%

Regulator assumes wrongdoing/breach before engagement with business

42%

Regulator has a strong enforcement approach

46%

Online systems are easy to use/submit information to

30%

I find their website useful and relevant for my business

30%

17%

40%

33%

11%

32%

28%

30%

Disagree

12%

5%

38%

36%

Neither agree or disagree

15%

14%

30%

Agree

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14%

41%

32%

4%

Don’t know

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

“The remit of animal welfare legislation, the ability to deal with the Department for Environment, Food and Rural Affairs (DEFRA) in particular, has become dysfunctional, fractured, and almost impossible over the last three years, and certainly since the change of government.

Nobody’s prepared to respond to anything.”

FSB member, Pet services, North East England FSB’s previous research also highlighted the importance of regulators drawing clear distinctions between the actions that a business must take to comply, and the steps that a business might want to take as a way to mitigate any misunderstanding regarding regulatory obligations and help with compliance.5 Some small businesses in our research expressed concern about severe penalties associated with non-compliance, particularly where the risk of falling foul of requirements is exacerbated by unclear guidance that the regulator produces.

This is why we welcome the Government’s Regulation Action Plan’s emphasis on the need for regulatory systems to be transparent and predictable, and for businesses to have enough time to adapt to new rules where there is regulatory change.6

It is also worth noting that small businesses are unlikely to have representatives acting on their behalf, so the process to challenge any decision by a regulator, including as part of enforcement action, needs to be as simple and clear as possible, and outlined from the outset in communications that the regulator issues. In addition to that, given that small businesses typically face less complexity in their regulatory issues than larger businesses, it would be sensible for regulators to also consider an advice/ guidance service to help small businesses comply with requirements, help to resolve complaints, and clarify or explain any decisions made.

“We’ve never had any enforcement action. Hopefully, we won’t have any enforcement action, but it’s a risk. As a senior manager, and as somebody who’s on the FCA register as the person responsible, we are talking potentially jail time if you get it wrong. So, the risk to you as an individual business owner is extremely severe. It’s not just financial sanctions. It’s potentially a custodial sentence if you get it badly wrong. I mean, obviously, that’s an extreme case, but some of the guidance-based rules are so vague and so open to misinterpretation that you find a lot of businesses will cover themselves and will go too far in the direction of compliance.”

FSB member, Financial services, North West England

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Enforcement

Our research shows that many more small businesses agree (46%) than disagree (11%) that the regulators that they engage with have a strong enforcement approach.

Getting the balance right on enforcement is critical for a healthy regulatory environment. A weak enforcement approach can potentially lead to unfair competition that can stifle growth in a regulated sector, while an approach that is too strong can lead to over-compliance due to fear of enforcement and barriers to entry. FSB’s previous research about the impact of the fast pace of regulation during the COVID-19 pandemic found that small businesses tend to ‘gold-plate’ their compliance, meaning that they over-comply due to a lack of clarity in requirements, and fear of falling foul of requirements.7 Gold-plating compliance can be particularly detrimental for small businesses with fewer resources, as it can lead them to divert resources unnecessarily, rather than focusing on business growth and investment.

“Since I set up this business, I’ve never had one health and safety inspector from the government walk into my workshop and make sure that we’re working under safe practices.

So, all these quangos and so-called experts generate all this legislation and regulation, but they don’t police any of it. So, what’s the point of regulation and legislation if there’s nobody there to make sure it’s put into place?”

“We know that staff is a major problem at the moment, but regulation on food and licensing laws, there’s nobody enforcing it. There doesn’t seem to be much going on there at all.”

FSB member, Hospitality business, Northern Ireland Our research also shows that more small businesses agree (42%) than disagree (14%) that regulators automatically assume wrongdoing or a breach before engagement with businesses. An overly strong regulatory enforcement approach in combination with the assumption of wrongdoing before engagement with businesses can lead small businesses to be especially fearful of regulatory action, and deter them from approaching regulators for help with compliance, due to fear of repercussions. One example of regulators being overly strong with their enforcement approach is where a small business’s first engagement with a regulator is an enforcement letter rather than helping them to comply through referring them to appropriate guidance or relevant information.

Another common example is the regulator pursuing a business without regard for its specific circumstances. Some small business owners, as part of this research, raised concerns around how enforcement can vary from one regulatory authority to another.

FSB member, Industrial cleaning machinery business, Yorkshire and the Humber fsb.org.uk

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

“Regulation is not consistent.

Application and enforcement varies from one inspector to the next, and consistency also varies from company to company.”

FSB member, Health and Social Care, North West England Our research shows that the number of small businesses that think that regulators treat them unfairly outweighs those that think that regulators treat them fairly. Out of small businesses that engage with at least one regulator, 23 per cent say that the regulators that they engage with treat them fairly, while 43 per cent say that they treat them unfairly.

Around a quarter (24%) are neutral on the matter.

Regulators that are deemed helpful are those that demonstrate understanding and awareness of those that they regulate. One small business owner shared a positive experience of how regulators have supported them with compliance during routine

inspections, by allowing them to resolve any issues within a reasonable timeframe and without the threat of enforcement.

Greater understanding by regulators of small businesses and how they operate can ensure that any guidance, tools and requirements that regulators produce can be specifically tailored to small businesses, meaning that small business owners will be clear on the steps that they need to take, and able to familiarise themselves and comply with requirements without the need for external advice.

However, our research shows that out of the 43 per cent of small businesses that say that regulators treat them unfairly, the most common reasons small businesses give for this perceived unfair treatment are that regulators do not consider the ability of small businesses to comply (47%), their requirements are the same as or similar to larger businesses (29%), and a lack of guidance specific to small businesses (11%). Other reasons that small businesses cite for regulators treating them unfairly include the perception that competitors are being treated more favourably, and lack of understanding and support by the regulator’s support staff.

Figure 4: Small businesses’ views on whether the regulator(s) that they engage with treat them fairly FSB regulation survey 2025 5%

Very fairly

18%

Somewhat fairly Neither fairly nor unfairly

24%

25%

Not very fairly

19%

Not at all fairly

9%

Don’t know 0% fsb.org.uk

5%

10%

15%

20%

25% 14

Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

“We have had a visit from the food and hygiene regulator. I’m not quite sure of the correct title, and they were very helpful. They did find that we were pretty much good throughout. They just found a couple of minor points, and they pointed them out, and gave us time to deal with them. The word is ... they were more human. They gave us time to fix something. And again, on the fire safety side, we’ve had an inspection - I’m not quite sure of the body or the name the title of the person who came - they reviewed our fire risk assessment policy, walked through the building again and there were a couple of minor things that they pointed out, and they gave us time to put those right. It was a realistic timeline. So, we don’t want to paint a picture of them all being terrible. They [regulators] do provide assistance to small businesses when necessary.”

FSB member, Accommodation services, Yorkshire and the Humber

Figure 5: Reasons why small businesses think that regulators treat them unfairly FSB regulation survey 2025 Do not consider the ability of small businesses to comply

47%

Requirements are the same as or similar to larger businesses

29%

Lack of guidance specific to small businesses

Unwilling to help comply

Other

0% fsb.org.uk

11%

5%

7%

10%

20%

30%

40%

50% 15

Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

“Many [regulators] don’t seem to understand their own obligations. Untrained and temporary staff are not helpful.”

FSB member, Professional, scientific and technical activities, South West England

“One of the main challenges with the Financial Conduct Authority is basically that the rules are massively over onerous for a small business, to the extent where you spend more time monitoring and adhering to compliance than you do actually looking after your customers, and I think there is a disparity between the level of regulation and scrutiny versus the size and systemic risk of your business.”

FSB member, Financial sector, North West England

“It’s all about interpretation. When we sold my previous company we suddenly got told to really clamp down a lot of health and safety things that we just used common sense for. But you get one inspector who would say one thing, and one would say another, and then one also said, don’t blame us, it’s the EU!” FSB member, Creative industries, Scotland

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Improving small businesses’ experiences when engaging with regulators It is vital that regulators recognise how different small businesses are to larger businesses, for example in terms of their capacity to comply with requirements, their need for guidance, and the resources that are available to them. It is also imperative for regulators to recognise that many small businesses, especially microbusinesses, need to be protected in the same way as consumers, to help ensure fair access to products and services.

FSB has for a number of years called for regulators to focus on enabling all businesses to innovate and grow, instead of focusing on a few wellresourced businesses. For example, as part of our 2023 research we called for appropriate support services to be established by regulators to support small businesses and to help “clarify any regulatory boundaries as well as access advice and guidance so that they can proceed with innovation in a timely manner.”8 In addition, FSB questioned the emphasis on narrow or specialized regulatory policies from regulators that consume significant regulatory resources but primarily benefit a small number of well-resourced firms, such as regulatory sandboxes, whose impact remains widely debated.

The findings of our research indicate that in fact small businesses would like to see more support overall from regulators as they rely on them to help with compliance, highlighting the importance of improving the user journey and experience of small firms that engage with regulators. The overwhelming majority of small businesses (94%) in our research say that regulators can take at least one step to improve the regulatory experience for small businesses.

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When asked to cite their top three priorities for improvement, small businesses led with resolving queries through humans rather than AI systems (50%), more engagement/consultation with small businesses (50%), and having more specific guidance and tools for small businesses (35%).

However, only 6 per cent of small businesses list regulators having to consider new technology or market developments as one of their three top priorities.

“Because we’re a specialist trade contractor, we’re heavily reliant on sole trading, self-employed subcontractors and employment laws which are so vague. There’s no clear advice. You phone up about VAT and again, no clear advice. You phone up helplines and they just point you towards their written regulations and tell you to make your judgment so it’s like we’re not legally trained, you know, we’re not experts.”

FSB member, Construction, South East England

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

“Instead of getting people who’ve got 20 years’ experience to come in and actually say, these policies aren’t fit for purpose or your regulation isn’t fit for purpose, you’re doing a tick-box exercise. Why are they not bringing business people in to consult in our actual sectors, where we have got the knowledge of what works and what doesn’t work?”

FSB member, Childcare sector, Northern Ireland

Figure 6: Steps regulators should take to improve the experience for small businesses FSB regulation survey 2025 50%

Resolve queries through humans rather than AI systems

24% 50%

More engagement/consultation with small businesses

18% 35%

Specific tools/guidance or services for small businesses

11% 32%

Resolve queries within a reasonable timeframe

10% 28%

More investment in the user journey for small firms

9% 18%

Collaboration with other regulators to align guidance

5% 15%

Improve transparency Dedicate more resources to address non-compliance Invest in better technology/systems Consider new technology/ market developments Other Don’t know No improvement needed/ None of the above

5% 12% 4% 10% 2% 6% 2% 9% 4% 4% 4% 2% 2%

0%

10% Top 3

fsb.org.uk

20%

30%

40%

50%

Top 1 18

Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Case study

Lewis D’Ambra, Space Forge, Wales “We specialise in growing seed crystals for the semiconductor industry and plan to move to a stage where we are able to undertake this process in space, where there are more favourable conditions that allow for a more efficient process.

However, there are challenges with regulation with regard to the re-entry to earth process. We are at the limit of what the regulatory process is designed to do, so there is a grey area in space law which does not necessarily prohibit the re-entry of space-grown crystals, but because it is not clear-cut permission or denial, the regulator is therefore cautious to grant the licence to do so without a clear policy steer from the Government.

We are currently working with the Government and the Civil Aviation Authority (CAA) to find a way forward with in-space manufacturing, and are hopeful for a solution soon. We do think that there are some good examples of licensing in other countries, for example where there are set statutory [time] limits for regulators to respond to licensing, such as in Portugal, where the statutory limit for a response on licensing applications is 90 days, which at least provides you with some certainty with regard to next steps. However, given that there are no such limits in the UK, this means that the process can get prolonged, and can generate uncertainty in timelines, which makes planning ahead much harder.

For us to be innovative there is a balance that we need to get: on the one hand we do need some prescription to know how to comply, and on the other hand if we are to try and test new technologies we need to have some flexibility to be able to do so. The UK has the frameworks to enable this; we just need to develop the knowledge, culture and confidence to make this a regular practice.”

“[Regulators should] understand that small businesses do not have the resources to employ experts. We have to do the work ourselves and we are most certainly not experts.”

FSB member, Construction, South East England

fsb.org.uk

There are also some sectoral differences around improving small businesses’ experiences with regulators. Those in the wholesale and retail sector (62%) are more likely to say that regulators should aim to resolve queries through humans rather than AI systems than those in the professional, scientific and technical activities (46%). Similarly, small businesses in the wholesale and retail sector (56%) are more likely to say that they would like to see more engagement and consultation with small businesses than those in the professional, scientific and technical activities sector (48%).

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Our research shows that the most common sources of regulatory advice for small businesses are GOV.UK and regulators or professional associations (both 20%), and professional service firms such

as accountants or lawyers (17%). Around one in six (17%) of small businesses surveyed use FSB’s website and member services to find information and advice about regulation.

Figure 7: Most common sources of regulatory information for small businesses FSB regulation survey 2025 GOV.UK

20%

Regulator or professional association

20%

Federation of Small Businesses (FSB)

17%

Professional services firms

17%

Sector-specific trade body

6%

Local authority

3%

Friends/other businesses

3%

Online groups/forums

3%

Social media

1%

Business support agency

1%

Other I don’t engage with regulatory information Don’t know 0%

fsb.org.uk

6% 1% 2% 5%

10%

15%

20%

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

FSB wrote to regulators in January 2025, to set out a number of measures to support small business growth.9 Amongst them were specific recommendations for the ICO to collaborate with FSB on a small business campaign and resources to make compliance easier, and for the CMA to set out how interventions under its new digital markets regime will protect small businesses and their customers on major online platforms. The latter is particularly important in light of the findings of FSB research on the difficulties that small businesses experience when operating on online platforms, including malicious and fake reviews, infringement of intellectual property and an inability to resolve disputes once issues arise.10 There are also ways in which regulators can work better together where there are overlapping areas of interest, to help reduce the impact on the businesses they regulate, and on their own resources. Greater regulator collaboration could help identify any conflicting requirements and guidance and help ensure regulatory alignment for those that engage with multiple regulators. We welcome the Government’s announcement to convene a Regulators Council, chaired by the Business Secretary, and attended by the chief executive officers of key regulators, as part of the Regulation Action Plan progress update in October 2025.11 The purpose of the meetings will be to “ensure there is regular dialogue between regulators and ministers to foster alignment on growth, collaborate on crosscutting policy issues, share best practice, drive cultural change within individual regulatory bodies and eradicate duplication between regulators.”

fsb.org.uk

We have also seen encouraging examples of collaboration among regulators to address emerging risks and new sectors, such as the Digital Regulation Cooperation Forum (DRCF), which works to ensure a coordinated and consistent approach across digital regulators including the ICO, FCA, Ofcom and the CMA, who are doing some valuable collaborative work in the space of new and emerging technologies such as artificial intelligence (AI). This approach better enables regulators to respond to the global nature of digital platforms and innovation, and ensure that their work is not duplicative. FSB’s 2024 report on AI called on the UK Government to enhance the resources and powers of the DRCF to maintain a coordinated approach to AI regulation and for it to become the first port of call for reporting new or suspected risks with AI, without fear of enforcement.12 In July 2025, DRCF also announced the development of a “unified digital library, providing ‘one-stop’ access to digital policy and regulation for innovators” to help navigate the regulatory landscape.13

“What would help? Clearer, more reliable guidance, e.g. when asking HSE if a proposed method was acceptable they said it hadn’t been tested in court so they didn’t know!”

FSB member, Architectural and engineering activities, South East England

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Regulator duties and objectives Being able to regulate effectively benefits both regulators themselves and those that they regulate.

However, regulators working in silos can lead to complexity and can even create conflicting or overlapping regulatory requirements, making the regulatory environment difficult to navigate for small businesses. The Regulation Action Plan published in Spring 2025 highlighted that one of the difficulties in the current regulatory approaches is being too riskaverse, and that rules-based frameworks can limit regulator discretion, and therefore lead regulators to fail to strike the right balance between managing risk and growth.14 The Action Plan also highlighted the need for regulators to be attuned to the challenges that businesses face and be able to adapt to new industries. However, it is worth noting that regulators also have their own challenges in meeting set-out commitments.

A 2024 House of Lords Committee report found that expansion of duties and objectives over time for some regulators has led to increasing risk of inefficiency without a clear sense of priorities.15 The same report also found that the increasing number of duties imposed on regulators could be contributing to limiting resources and availability of the right skills, as well as in some cases a lack of transparency and accountability. FSB’s previous research found that two-thirds (62%) of small businesses perceived the domestic regulatory environment to be more of a burden than a benefit to their business.16 Regulators have a key role to play in alleviating that burden and ensuring that the small businesses that they regulate are not disproportionately affected by the rules that they have in place. FSB recognises the complexities that regulators face; however, where responsibilities or areas overlap between regulators, closer working relationships between them would help to standardise some of the processes and guidance as well as giving an opportunity to reduce the regulatory burdens on businesses.

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The Government has announced a number of initiatives to improve the efficiency of regulators in addressing barriers to innovation and reducing complexities for businesses. In October 2024, the Government announced the creation of the Regulatory Innovation Office (RIO), which will aim to reduce burdens for businesses that are hoping to bring new products and services to the market and help with regulator collaboration.17 A progress report on its first year highlighted its commitment to continuing to work closely with Government departments including HM Treasury and the Department for Business and Trade (DBT) to “identify the changes needed to embed a proinnovation regulatory system in the UK”.18 Similarly, the Industrial Strategy published in June 2025 re-affirmed the Government’s intention to break down unnecessary regulatory barriers, making innovation easier, and opening up opportunities for high-potential firms.19 The Regulatory Action Plan also committed to reducing uncertainty across the regulatory system by working with regulators “to achieve greater clarity on their roles, approach and processes. This will include making sure regulators have a focused set of duties and clear steers, including a strong focus on investment and growth; and clear processes and published timelines for decisions.”20 There are some overarching frameworks that regulators are required to follow to exercise their function. The Regulators’ Code was introduced in 2014 under the Legislative and Regulatory Reform Act 2006, to provide a framework for how regulators should engage with those that they regulate.21 The Act was extended by the Enterprise Act 2016 requiring regulators other than local authorities to have regard to the Code.22 The Code has a number of provisions, including about how regulators should carry out activities in a way that supports those that they regulate to comply and grow, have clear

22

Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

information, advice and guidance to help to comply, and ensure that they are transparent. The Code also affirms the Government’s commitment to ensuring that it is effective, and encourages businesses to challenge regulators who are not acting according to published policies and standards. However, it is well known that small businesses are unlikely to have suitable expert representation and therefore, any process to challenge a regulator needs to be as clear and simple as possible, and outlined as part of regulatory compliance with the Code.

In addition to the Regulators’ Code, many regulators are also in scope of the Growth Duty which requires them to have regard for economic growth. As part of that, regulators should ensure that they exhibit behaviours of smarter regulation, including being “business aware” and “proportionate”.23 While we recognise that small businesses are likely to have little awareness of regulators’ duties and objectives, as small businesses are focused on simply complying with requirements, the Growth Duty, if applied effectively, could benefit small businesses if it were to translate to SME-friendly outputs. This is why it is crucial that any duties placed on regulators provide an appropriate steer to consider small businesses as part of their work on proportionality. For example, the statutory guidance on the Growth Duty, which applies to over half of existing regulators, states that regulators should have regard to growth by considering seven key drivers of economic growth, including innovation, competition, efficiency and productivity, and, in addition, “…regulators may also consider other aspects of economic growth, or other objectives that relate to economic growth, such as the desirability to foster regional growth or support SME development.” While it is positive that small businesses are referenced as part of the Growth Duty, there should be a more formal consideration alongside the drivers of economic growth to highlight their importance in competitive and high-growth markets.

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Small and medium businesses represent over 99% of the business population, representing three-fifths (60%) of total private sector employment, and over half (51%) of private sector turnover, and therefore play a significant role in the economy.24 With that said, we welcome the Government’s commitment to a clearer and more focused legal framework on growth within the Regulation Action Plan progress update published in October 2025, stating that:

“We are determined to align key regulators’ activities and decisions more closely with the government’s Growth Mission while ensuring they fulfil their policy intent. We will reform the Growth Duty so that the legal framework is clearer, more focused and ensures regulators must consider and promote growth. We will work with regulators to ensure they have clarity from government regarding what growth means for them.” 25 Regulation Action Plan, HM Treasury In 2025, the National Audit Office (NAO) opened a study on whether the Department for Business and Trade, HM Treasury and regulators are aligned in their work on how regulation can contribute to growth. The to the purpose of the study was to assess whether regulators have adapted their approach in response to the Growth Duty and whether departments are monitoring to identify good and bad practice.26 In January 2026, NAO published their findings in a report which found that while the majority of regulators have been changing how they operate as a result of the Growth Duty, Department for Business and Trade has not monitored the implementation of the Growth Duty and does not have a definitive list of which regulators are within its scope.27

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

RECOMMENDATIONS • Regulators should be encouraged to establish

a model for regulator collaboration similar to the Digital Regulation Cooperation Forum (DRCF), where responsibilities or areas overlap. Greater regulator collaboration could help to identify any conflicting requirements and duplicative or conflicting guidance, and help to reduce the regulatory burden by aligning regulatory requirements for small businesses that engage with multiple regulators. Our research shows that almost a fifth (18%) of small businesses say that they would like to see more regulator collaboration to align guidance.

The DRCF publishes all accomplishments relating to regulatory alignment and collaboration as part of its annual report, including about how it is supporting economic growth and regulator effectiveness. In a similar way, as part of this model, regulators could report on how they have collaborated together to help reduce the regulatory burden on small businesses.

• Regulators should see it as part of their

Growth Duty to try and minimise any uncertainty for regulated entities created by emerging caselaw in the advice and guidance that they give. Regulators should aim to give regulated entities confidence through guidance about what constitutes compliance through clear examples, so that the risk of falling foul of requirements is transferred away from the business community. Where there are grey areas that regulators cannot clarify with guidance, the solution should not be to turn to case law, but rather to make the Government aware of any queries that they are unable to answer, so that there is legislative change to help give certainty.

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• Regulators should expand consideration of

the Growth Duty so it covers not only the SMEs that they regulate, but also those that that may be consumers of the products and services that they regulate. This is especially pertinent for utility regulators. For example, this could be done by extending some consumer protections to the smallest businesses, who are more similar to consumers than corporates or industry, so they are adequately protected in the market. Sometimes the most pro-growth thing a regulator can do is to protect small businesses better and support their growth that way.

• The Department for Business and Trade

should include SME development, including start-ups and self-employment, as part of the drivers of economic growth in the Growth Duty. While it is positive that small businesses are referenced as part of the Growth Duty, SME development should be one of the key drivers of economic growth to highlight their importance in competitive and high growth markets. Currently, alongside the seven listed key drivers of economic growth, including innovation, competition and efficiency, and environmental sustainability, the Growth Duty only states that “…regulators may also consider other aspects of economic growth, or other objectives that relate to economic growth, such as the desirability to foster regional growth or support SME development.” Making SME development a key driver of economic growth will reinforce the Government’s commitment to small and medium sized businesses being “the engine room for growth”. This could include specific examples of how regulatory barriers and complexity have been mitigated over the past year, and should be accompanied by appropriate metrics to assess regulators’ compliance with the Growth Duty and, where relevant, how these promote SME growth specifically.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

• The Department for Business and Trade

should seek commitments from both Companies House and HM Revenue and Customs (HMRC) to apply the Growth Duty to all of their activities, and include both organisations within scope of the target to cut administrative burden for businesses by 25 per cent. Our research shows that Companies House is the most common regulator that small businesses deal with for the running of their business and therefore they should also be bound by the same rules as other regulators within its scope. Similarly, our previous research shows that average small business spends £4,500 a year on tax administration, and the business owner will spend an average of 44 hours of their time. The tax system is more complex than it needs to be for small businesses, and coupled with a decrease in standards of HMRC customer services has meant that many small businesses spend a disproportionate amount on tax compliance.

Therefore, seeking explicit commitments to report on Growth Duty from both organisations and to cut administrative burden by 25 per cent would help to achieve set target.

• The UK Government should publish

guidance for regulators where their duties and objectives overlap. This would help to support regulators in enabling compliance, and provide clarity where different duties overlap.

For example, it would help to avoid any tradeoffs between compliance with the Regulators’ Code and the Growth Duty, and help to manage resources more effectively. We welcome the Government’s suggestion to the Business and Trade Committee that strategic steers would be issued with a degree of cohesion, with an emphasis on growth and investment as well as rapid and consistent decision-making.28

fsb.org.uk

• The Department for Business and Trade

should require regulators to publish how they comply with the Regulators’ Code on an annual basis. The Regulators’ Code has a number of provisions, including about how regulators should carry out activities in a way that supports the businesses that they regulate to comply and grow, provide clear information, advice and guidance to aid compliance, and ensure that they are transparent. At present the rules state that regulators need to publish their compliance with the Code; however, the frequency of this is not outlined in the guidance. Publishing compliance on an annual basis will support better transparency and accountability among regulators, particularly those that regulate small businesses. Given that the Code states the Government also monitors compliance with the Code, it would also be helpful for any summary of monitoring to be published at least every five years to ensure that regulators are complying with the provisions within the Code.

• Regulators should publish small business-

specific guidance, together with illustrative examples about how to comply. A fifth (20%) of small businesses in our research say that a regulator or a professional association is the main source of their regulatory information.

Therefore, the guidance that they provide should be clearly signposted on the main page of their website for ease of reference, and, where possible, the main requirements and illustrative examples should be presented in different formats such as videos, graphs or flowcharts.

In addition, access to such guidance should be available to all, and not locked away behind a login or a paywall, so that any business is able to access help with compliance. This will ultimately help to minimise the costs associated with compliance through reducing the need for external advice and the time spent on trying to understand the steps a small business needs to take to comply.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

• Regulators should be required to have a

customer service mindset with respect to those that they regulate, to better assess and implement services that are aligned to small business needs, and improve their user journey. Regulators having a service mindset could better focus regulator priorities on understanding small business needs and tailoring their user journey to be appropriate to them. This could be partly based on the Government’s Service Standard, which is used to assess any transactional services on GOV. UK. The standard includes a number of points around meeting users’ needs, and making sure that a service is simple to use, and solves a problem for users. Our research shows that just over a quarter (28%) of small businesses say that one of their three priorities for regulators is to have more focus or investment on the user journey for small businesses, to improve small businesses’ experience with regulators. As part of this, technological tools and AI could be used to improve the user journey, for example through tools to filter and sort systems for requests and queries; if an automated response is unable to address a precise query, the issue could be rapidly escalated to real advisors to help resolve it. Small businesses turn to regulators for advice to help give them confidence with compliance, particularly where this is not clear in guidance, and appropriate support is therefore critical to ensure that their case has been adequately understood.

• Regulators should prioritise resources

towards regulatory approaches that benefit and encourage a broad range of businesses to grow, rather than focusing on policies and procedures which may benefit a few well-resourced firms. Only 6 per cent of small businesses in our research say that regulators considering new technology and market developments is one of their top three priorities for regulators to improve the experience of small businesses. Meanwhile, the majority of small businesses in our research would like to

fsb.org.uk

see more focus on regulators improving their resources, including helping small businesses to comply, and greater dedication of resources to resolving complaints and queries which could help to reduce the administrative and financial cost of compliance. Our research shows that if the Government’s 25 per cent regulatory reduction target were to be achieved, then small businesses could save approximately 95 million hours that they spend complying with regulatory requirements, and £9 billion in financial costs.

Regulators should develop support services that enable all small businesses looking to innovate to be able to clarify regulatory boundaries rapidly, and access advice and guidance so they can proceed with innovation in a timely manner. An example of this type of service was recently launched by the Information Commissioner’s Office.

• Regulators should clearly outline any policy

they have with regard to investigations and enforcement, including outlining how their approach on regulatory action is proportionate according to business size and risk. Small businesses should be helped to comply first before any enforcement action takes place, as without help with compliance, small businesses may be deterred from seeking help from regulators with compliance when they need it, or when issues occur due to fear of enforcement. In addition, to help alleviate any uncertainty for small businesses, any complaints or advice procedures should be accompanied by clear timelines for expected responses, and regulators should clearly state that if a small business approaches them for help with compliance or to report any issues, this will not increase its chances of being subject to enforcement action.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

The current regulatory environment Regulation that small businesses find helpful Our research shows that the main types of regulation that small businesses engage with for the running of their primary business are data protection (57%), workplace health and safety (51%), and employment law (47%). Comparing the findings to FSB’s previous regulation research (published in 2017), there has been a shift in the types of regulation that small businesses engage with the most. In 2017, small businesses cited workplace health and safety, employment law, data protection and company law as the most relevant regulations for their business to engage with. The notable increase in engagement with data protection regulation by small business owners since 2017 is due to the General Data Protection Regulation (GDPR, now UK GDPR) that came into force in 2018 and which introduced new requirements around the lawful basis for processing data, and enhanced data subject rights.29 As we would expect, there are also some sectoral differences in levels of engagement with different types of regulation. Small businesses in the manufacturing sector are more likely to say that they engage with workplace health and safety regulations (71%) than those in professional, scientific and technical activities (40%), and small businesses in the professional, scientific, and technical activities sector are more likely to say they engage with data protection regulation (65%) than those in the wholesale and retail sector (54%).

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While we recognise that it is not always possible to identify some kinds of regulation as helpful and others as burdensome, due to the different impacts on businesses according to their size, sector and the products and services that they offer, it is still useful to see the types of regulation and the reasons why some are favoured more than others.

Regulation that is helpful for businesses ensures that all market participants play by the same rules and helps to protect and incentivise business activity. For example, the Government’s previous research identified various benefits of regulation, including those that benefit the business itself, or the employees, such as star ratings and accreditation, as well as broader benefits, such as promoting fair competition and ensuring safe practices.30 Our research also shows small businesses recognise that some regulation is helpful and necessary for the running of their business and ensuring a competitive and fair economy. Two thirds of small businesses (67%) say that they find at least one type of regulation helpful for the running of their business, and out of those, the most common types of regulation that small businesses find helpful are workplace health and safety (22%), data protection (19%), and employment law (16%).

27

Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Figure 8: Types of regulation that small businesses engage with the most for the running of their main business FSB regulation survey 2025 57%

Data protection 51%

Workplace health and safety 47%

Employment law 40%

Pensions

38%

Company law Environmental/waste management regulations

33% 25%

Product standards and safety/liability

21%

Certified standards e.g. BSI and ISO Intellectual property laws

14%

Public procurement rules/requirements

14%

Planning

14%

Building standards

14%

Consumer and credit legislation

13% 10%

Food safety and hygiene Competition law

4%

Bankruptcy/insolvency laws

4% 11%

Other 0%

10%

Our research also shows that the likelihood of a business finding some regulation helpful decreases when size and turnover increase. For example, sole traders are more likely to find at least one type of regulation helpful (71%) than small businesses with one to nine employees (66%) or 10 or more employees (65%). Similarly, small businesses with a turnover of up to £100,000 are more likely (73%) to find at least one type of regulation helpful, compared fsb.org.uk

20%

30%

40%

50%

60%

with two thirds of those with a turnover of £100,001 to £500,000 (67%), or three fifths of those with a turnover of £500,001 or more (61%). Our research also shows that sole traders are more likely than other types of businesses to find regulations helpful because it helps them to bring new or improved products to the market, and enter new markets more generally, as well as encourage investment into their business.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Figure 9: Types of regulation that small businesses find helpful FSB regulation survey 2025 Workplace health and safety

22%

Data protection

19%

Employment law

16%

Company law

12%

Environmental/waste management regulations

11%

Certified standards e.g. BSI and ISO

11%

Product standards and safety/liability

9%

Pensions

9%

Food safety and hygiene

7%

Intellectual property laws

6%

Building standards

6%

Planning

5%

Consumer and credit legislation

4%

Public procurement rules/requirements

3%

Bankruptcy/insolvency laws

1%

Competition law

1%

Other

6%

None of the above 0%

33% 5%

10%

Our research shows that regulation that is helpful usually supports businesses to operate in a fair environment and is conducive to their aims – highlighting the importance of balancing the need to regulate with benefits that it can deliver for those that it affects including businesses, by supporting rather than restricting their ability to operate. Only 15 per cent of small businesses in our research agree that the Government makes it clear what the purpose of regulation is, while 58 per cent disagree.

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15%

20%

25%

30%

35%

Out of small businesses that say that they find at least one type of regulation helpful, the most commonly-cited reasons are that they help to build trust among suppliers and customers (42%), enable their business to meet insurance obligations (32%), and create a level playing field with competitors (31%). This is similar to the findings of FSB’s 2017 regulation research where the most common beneficial impacts of regulation for small firms were cited as trust among customers (50%), creating a level playing field with competitors (38%), and enabling productivity and innovation (35%).

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Figure 10: Reasons why small businesses find regulation helpful FSB regulation survey 2025 Built trust among current or potential suppliers/customers

42%

Enabled my business to meet insurance obligations

33%

Created a level playing field with competitors

31%

Retained existing customers

26%

Increased efficiency for my business

21%

Enabled me to bring new/improved products or services to market

14%

Enabled my business to enter a new market

9%

Encouraged investment in the business

5%

Enabled my business to access external finance

3%

Enabled my business to retrieve assets owed to it

2%

Other

11%

Don’t know 0%

14% 10%

However, others have also expressed concern in certain areas that lack regulation such as artificial intelligence (AI), which could help business owners that use it to have some protection from uncompetitive behaviours and help use it to their advantage. FSB’s 2024 research on artificial intelligence found that nearly three quarters (73%) of small businesses have concerns about how it might potentially impact their business, these include lack of knowledge to use it correctly, ability to manage security risks, and the impact of deepfakes and their intellectual property.31

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20%

30%

40%

50%

“We’ve been discussing AI regulation, and the majority of creatives are of the opposite view that you would expect because we are thinking there should be more legislation at the moment. It just seems to be exploding and going in all directions, and people are using it, and no one’s really thinking about it.”

FSB member, Creative industries, Scotland 30

Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Regulation that small businesses find burdensome While small businesses view some forms of regulation as helpful, particularly if they support growth and their ability to do business, regulation that is burdensome is often associated with having to dedicate significant resources for compliance, which can inhibit business growth. Our research shows that the vast majority (80%) of small businesses find at least one type of regulation burdensome, with the most commonly cited ones being employment law (33%), data protection (27%), and workplace health and safety (21%). This is similar to our 2017 regulation research which found that employment law was the most burdensome type of regulation for small businesses at the time.

However, one key difference was that pensions regulation featured more prominently in 2017, as the staging date for auto-enrolment for the smallest businesses was in 2016, meaning that small businesses with eligible employees had the responsibility for enrolling them in a scheme by that date. While pensions regulation features slightly lower in this latest research, with 19 per cent of small businesses citing it as burdensome, FSB’s recent pensions research found that many issues still persist, including cost and complexity associated with compliance, contributing to the overall increasing burden of employment.32 Our research finds small businesses continue to express their frustration with pensions regulation, particularly where there is a high turnover or a high number of employees opting out.

“It’s just some of the burden of going back to pensions again – we just don’t see why. We’re a very small business, at most we’ve had four to six employees part time. They’re students. We have to give them letters. They have to read the letters and decide whether they want to join the pension scheme or not.

Even if they’re below the threshold, they can choose to join if they wish. But all of them do not want to join a pension scheme at that age as they’re 19, 20 years old and it’s the last thing on their minds as they just want a bit of pocket money.

Anyway, another issue is keeping records because I was with one of the pension providers and hadn’t made a contribution in over two years. But I was paying £25 a month, which then went up to £36 a month, just for having the luxury of a pension scheme. So, we end up running with costs of several hundred pounds a year through doing absolutely nothing, and there’s just more and more cost. I’ve now moved to a different pension provider, where there is no monthly cost, no monthly fee associated with that, but I had to go and find out if it was possible to change pension providers, research if there were some free ones, and then make the change which I’m actually in the process of doing now.”

FSB member, Accommodation services, Yorkshire and the Humber

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Just over a quarter (27%) of small businesses cite data protection regulation as being burdensome.

FSB’s previous research found that the main reasons why small businesses deal with data are related to payment to customers and suppliers, followed by employing staff.33 The ability of small businesses to engage with the data protection regime in a way that does not hinder their ability to operate is crucial. However, during our research, many small businesses expressed concerns about data protection regulation due to its complexity.

“The level of expectation on a small business and documentation that has to be available and issued in relation to privacy policies and GDPR. All the things that big businesses seem to have whole departments employed to manage and to deal with, yet they still have data leaks and get away with it, whereas small businesses have exactly the same burden of regulation in terms of data protection.”

FSB member, Financial services, North West England More recently, the Data (Use and Access) Act 2025 received Royal Assent in June 2025, with further additional changes due to be made to data protection law and more responsibilities for small business owners to comply with the data protection regime. While there are some provisions which can make compliance easier for small businesses, such as making it clear that businesses will only need to make reasonable and proportionate searches in relation to subject access requests (SARs), there are also some new requirements which will take some adjustment, and have the potential to further complicate compliance efforts. These include changes to children’s access requirements for online fsb.org.uk

services, as well as a requirement for businesses to have a system in place for data protection complaints.34 Small businesses in our qualitative research often cited regulation as burdensome when they felt that regulatory requirements would not help to achieve the objective of the regulation, and instead require them to dedicate additional resources without necessarily any benefit to their business or the economy as whole, causing them significant frustration. This has also been raised in relation to cross-border trade within the UK nations.

Following the UK’s exit from the EU, the 2019 Northern Ireland Protocol created trade barriers between Great Britain and Northern Ireland, which were disrupting business. The Windsor Framework followed from the NI Protocol in 2023 and, whilst framed as a compromise to support the smooth flow of goods, a number of complex regulatory provisions remain. As Northern Ireland holds a unique position, being part of the UK’s customs territory yet aligned with many EU goods rules, businesses in other parts of the United Kingdom are also subjected to the Windsor Framework’s associated bureaucratic responsibilities when trading with Northern Ireland.

While new regulations and systems are being rolled out, many businesses, particularly SMEs, are being left without the practical support needed to comply or adapt with confidence.

“Not fit for EU labelling – somebody sat in a dark room and said, how can we do this, and never thought about the impact to the food operator, and the cost. It’s just to appease, and mind you, if they were able to see the source of the product and the origin of the product, then this wouldn’t make a difference.”

FSB member, Technology services business, Northern Ireland 32

Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Figure 11: Types of regulation that small businesses find burdensome FSB regulation survey 2025

33%

Employment law 27%

Data protection 21%

Workplace health and safety

19%

Pensions Environmental/waste management regulations

16% 12%

Company law Public procurement rules/requirements

9%

Product standards and safety/liability

9%

Certified standards e.g. BSI and ISO

8%

Planning

8% 6%

Consumer and credit legislation

5%

Building standards

4%

Food safety and hygiene Intellectual property laws

2%

Competition law

1%

Bankruptcy/insolvency laws

1%

Other

4% 20%

None of the above 0%

5%

Our research shows that the proportion of businesses citing at least one type of regulation as burdensome increases with business size and turnover. For example, sole traders are less likely to say that at least one type of regulation is burdensome (66%) than small businesses with one

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10%

15%

20%

25%

30%

35%

to nine employees (84%), or 10 or more employees (85%). Similarly, small businesses with a turnover of up to £100,000 are less likely to say that at least one type of regulation is burdensome (66%), than those with a turnover of £100,001 to £500,000 (83%), or £500,001 or more (91%).

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

“It makes it harder and harder even for startups as well with all the regulations. I think for startup businesses there needs to be more help as well just to get off the ground. It’s very difficult to start a new business... So, I think the employee size needs to be taken into consideration. You know, you have one employee, and you’ve got to comply with everything. It’s just ridiculous.”

FSB member, Accommodation services, Yorkshire and the Humber Looking at some specific types of regulation, 37 per cent of microbusinesses with one to nine employees say that employment law is burdensome compared to 52 per cent of small businesses with 10 to 49 employees. This likely due to the complexity of compliance, with employment regulation increasing as the number of employees grows due to their different needs and requirements. The Employment Rights Bill35 was introduced to Parliament in October 2024, and included a number of reforms, including around zero hours contracts, unfair dismissal and Statutory Sick Pay.36 FSB research published in January 2025 on the Employment Rights Bill found that the vast majority (92%) of small employers have concerns about the measures in the Bill, with two-thirds (67%) of small employers expecting to reduce hiring, and more than half (56%) expecting to cancel or scale down plans for investment in their business.37

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Since this survey, the Government has made a significant change on reducing the qualifying period for unfair dismissal provisions which FSB campaigned for.38 Nevertheless, excluding the previously proposed day one protection from unfair dismissal, our research shows that 87 per cent of small businesses say that they would be concerned about the measures in the Act. Our research shows that the main reasons why small businesses find some regulation burdensome are related to the administrative effort and financial cost of compliance. Out of the 80 per cent of small businesses that say that at least one type of regulation is burdensome, the most commonlycited reasons are overly complex or inconsistent language (54%), the overall quantity of regulatory requirements (49%), and the cost of external expert advice (49%). Interestingly, compared with our 2017 regulation research, the aspects of regulation that create the biggest barriers were the overall quantity of regulation, poor design, and complexity and inconsistency of language as a barrier. However, the cost of advice was noted much less frequently in 2017 (19%) than in the current research. The cost of external advice can be particularly prohibitive for small businesses who do not have an in-house compliance resource.

Our research shows that concerns around the cost of external advice also increase with business size, as businesses with 10 or more employees are more likely to say that the cost of external expert advice is a concern (68%) than those with one to nine employees (47%).

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Figure 12: Reasons that small businesses cite for finding regulation burdensome FSB regulation survey 2025

Overly complex/inconsistent language

54%

The overall quantity of regulatory requirements

49%

Cost of external expert advice

49%

Monitoring, recording and reporting requirements

47%

Fear of enforcement action

41%

Poorly designed regulation(s)

38%

Lack of quality support and guidance

38%

Adjusting to changes in regulation(s)

31%

Unequal impact/application of regulation(s) High regulatory fees

25%

The impact of specific individual regulation(s)

24%

Too prescriptive

23%

Too broadly drafted

20%

Enforcement of regulation(s)

19%

Private legal action

5%

Other

6%

Don’t know 0%

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29%

2% 10%

20%

30%

40%

50%

60%

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Looking at the wider picture of the overall regulatory landscape, it is no surprise that, once again, concerns about burdensome regulation positively correlate with the size of the business. Small businesses with 10 or more employees are more likely (60%) than those with one to nine employees (48%) to say that that the overall quantity of regulatory requirements is a concern, and small businesses with 10 or more employees are more likely to say that monitoring, recording and reporting requirements are a concern (61%) than those with one to nine employees (46%).

This is in line with our findings from 2017, and is likely due to more regulations becoming applicable as

the business grows, for example, from increasing the number of employees or gaining business premises.

The 2017 research also found that the overall quantity of regulations, poor design, and complex and inconsistent language were the main aspects of regulation causing the biggest barriers.

Some small businesses as part our latest research say that the cumulative burden of regulatory requirements, in relation to employing staff, has led them to stop employing staff altogether and instead turn to outsourcing.

“We used to employ a couple of handymen to go out and do repairs and things like that. We no longer employ them because of this pensions rule and National Insurance, and running payroll and all that stuff. We just outsource it. There was absolutely no point, and we just had to let them go because the cost of maintaining a couple of part-time employees was so onerous… The regulatory burden of maintaining a couple of part-time employees compared to just outsourcing it and giving these jobs to self-employed people, we just had to let these people go. And these people have been with us for 15 years, you know, and it was the pensions thing that tipped us over the edge. And now we just don’t employ anybody in that business at all, and we outsource everything.”

FSB member, Property business, North West England

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Regulatory fees Regulatory fees, and in particular high increases in regulatory fees, can be prohibitive for the smallest regulated entities and create a significant barrier to entry to a regulated market. A quarter (25%) of small businesses that cite some regulation as burdensome say that this is because of high regulatory fees. Most recently, small businesses have seen an increase in fees from a number of regulators, including twice in less than two years from Companies House, in May 202439 and February 2026.40 The Information Commissioner’s Office (ICO) raised fees in 202541 and the Financial Conduct Authority (FCA) from 2025/26.42 It is worth noting that, following FSB campaigning, while the ICO increased fees by almost 30 per cent, the rise is lower than the 37 per cent increase that was proposed initially at consultation.

One of the most significant increases of fees in recent years has been from Companies House who have increased most of their fees for the second time in under two years, with the latest set of increases in force from February 2026. For example, the latest increase using software to file company incorporation documents has increased to £100 from £50, meaning a 100% increase for incorporation, and the fee for digital annual confirmation statements has increased from £34 to £50, an almost 50% increase.

While FSB recognises the need for regulators to fund their activity, we do not agree with significant increases in fees for small businesses, and have campaigned for the Government to seek instead to reduce or remove regulatory fees altogether for the smallest of businesses. Small businesses are not able to absorb costs at the same rate as larger businesses, due to lack of reserves, and therefore are more likely to be made to pass on costs to consumers. However, when there are significant

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increases in regulatory fees, small businesses often tell us that it would be impossible to pass on increased costs to consumers, as it would mean increasing products costs by two or three times in order to offset the full impact. This means that competitors with larger resources and cash reserves are often likely to get an advantage in a regulated market if any increases are not appropriately managed.

High regulatory fees can also be prohibitive for small businesses in light of other costs rising. Our latest Small Business Index for Q3 2025 shows that cost factors are constraining the ability of small businesses to grow over the next 12 months.43 The tax burden was cited by 45 per cent of small businesses as a barrier to growth over the next year, second only to the state of the domestic economy (68%), and closely followed by 34 per cent who say that labour costs are a barrier to growth. Both tax and labour are likely to be commonly cited in part in response to the hike in employer National Insurance contributions in April 2025. This highlights the unforgiving environment that small businesses currently operate in.

In addition, given that our research shows that 40 per cent of small businesses say that they engage with four or more regulators for the running of their main business, increases in regulatory fees across regulators can be particularly detrimental to those with fewer resources, as even the smallest of fee increases across a number of regulars could lead to a significant compounding in the cost of regulation, even before considering other costs associated with compliance.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Case study

Catherine Bunn, Highland Campervans, Scotland “We are regulated by the FCA as credit brokers, so that we are able to advertise on our website that the motorhomes that we sell can be bought on credit with a price per month rather than total cost, offering our customers the choice of what is most suitable for them. Over the years, we have seen the price of FCA fees increase substantially, from £160 per year in 2018 to £876 in 2025, and that’s without even mentioning the constantly increasing complexity of filing the required paperwork every year to be regulated. If we get something wrong when we file, the FCA is very quick to fine us £250, leaving us further out of pocket. Given the continued increase in fees and the small amount of commission that we get from referral to credit agencies, it seems that the FCA would like to see companies like us push more for clients to take finance rather than pay in cash, for us to be able to afford the continued increases in regulatory fees. This seems very counterintuitive. We are struggling to keep up with inflationary increases, let alone a more than five-fold increase in fees. We definitely would not have been able to increase the prices of our own services by that much. After the FCA fees last year, we were left with £24 in income for providing credit brokering services. The FCA fees basically wiped out any income for us and they took it for themselves.”

RECOMMENDATIONS • Regulators should consider regulatory fees as part of the overall cost of regulation on businesses. A quarter (25%) of small businesses that cite some regulation as burdensome say that this is because of high regulatory fees, and our research also shows that around one in 10 small businesses (11%) say that the majority of costs relating to regulation are due to regulatory fees.

Given that 40 per cent of small businesses engage with four or more regulators for the running of their main business, any increase in fees can have a disproportionate impact on their ability to compete effectively in the market.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Impact of the regulatory burden on small businesses The impact of the regulatory burden is substantial for small businesses. Small businesses are already vulnerable due to being less resilient to financial shocks than larger firms, as they are less likely to have financial reserves, meaning that any requirements that impose a substantial burden on resources are likely to have a disproportionate impact on them. Out of small businesses that say that at least one type of regulation is burdensome, the main consequences are reduced profitability (64%), needing to increase prices to absorb costs (46%), avoiding employing more staff (45%), and preventing/diverting resources either from improvement or creating of a new product, service or process (45%). Out of 7 per cent of small businesses that cite other impacts, the majority mention wasted time through having to understand requirements and complying with requirements, as well as the impact on their confidence to conduct business, and increased levels of stress.

voiced concerns around the reduced availability of resources compared to larger businesses when implementing regulatory requirements, and the need for governments and regulators to consider their ability to comply.

This is similar to our 2017 research where small businesses cited reduced profitability (52%) as the biggest impact, followed by reduced productivity and innovation (36%), inhibited workforce expansion (34%) and increased prices to absorb costs (30%).

With that said, the most notable difference between our 2017 research and 2025 research is the impact of increasing prices to absorb costs, which has increased from fourth place to the second biggest impact that small businesses cite as a result of the regulatory burden. Small businesses are not able to absorb costs in the same way as larger businesses, and therefore are often left with no option but to pass them onto consumers in the form of higher prices. This not only has an impact on consumers’ purchasing ability, but also on small businesses’ ability to compete with larger businesses, who are able to keep prices lower due to greater financial reserves. Small businesses, as part of our research,

FSB member, Accommodation services, Yorkshire and the Humber

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“I think that they should not treat small businesses like big businesses, because we just don’t have the manpower. We don’t have the time to do that. And I would say that small businesses are actually crucial to a society…. We are part of the fabric of society that has to be working well, and the Government or the regulators do not help us in any way or help the people who are going to work for us.”

Small businesses with 10 or more employees are more likely to report reduced profitability as a result of the regulatory burden (79%) than those with one to nine employees (66%), and small businesses with 10 or more employees are also more likely to say that they have had to increase prices to absorb costs (67%) than those with one to nine employees (43%). Similarly, small businesses with 10 or more employees are also more likely (58%) than those with one to nine employees (47%) to say that the burden of regulation has stopped them from employing more staff, highlighting the significant opportunity loss for small businesses to manage and grow their business.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Figure 13: Impact of burdensome regulation on small businesses FSB regulation survey 2025

64%

Reduced my profitability I’ve had to increase prices to absorb regulatory costs

46%

Stopped me from employing more staff

45%

Prevented from improving/creating a product, service or process

45%

Inhibited investment in workforce skills/training

30%

Prevented from moving into a new market

21%

Changed my business model/ nature of my business

20%

Lost orders/customers

19%

Had to make alternative/ additional capital investments Other

Don’t know 0%

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16%

7%

4% 10%

20%

30%

40%

50%

60%

70%

80%

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Administrative and financial impact of compliance with regulatory requirements Our research shows that 68 per cent of small businesses say that the cost of complying with regulatory requirements has increased in the last 12 months. Over a quarter (27%) say that it has neither increased or decreased, and only 1 per cent say it has decreased. However, this perception varies by business size. Our research shows that 50 per cent of sole traders say that the cost of complying with regulatory requirements has increased in the last 12 months. This increases to 72 per cent of those with one to nine employees, and 78 per cent of those with 10 employees or more. Sole traders are more likely to say that the cost of complying with regulatory requirements has neither increased nor decreased (38%) than small businesses with one to nine employees (25%), likely due to the difference in the amount of regulation affecting employers.

The cost of complying with regulatory requirements for small businesses is measured in both time and money spent. Small businesses are

disproportionately affected by the compliance burden, as it is usually the business owner that holds the legal responsibility to read, understand and implement any changes within the business.

Our research shows that small business owners spend 67 hours on average per year complying with regulatory requirements.

Our data also shows that business size is a good predictor of the amount of time that it takes a business to comply with regulatory requirements.

Those with no employees spend an average of 45 hours a year complying with regulatory requirements, increasing to 68 hours for microbusinesses (one to nine employees), and 93 hours for businesses with 10 or more employees. There are also some sectoral differences; for example, businesses in the professional, scientific and technical activities sector are slightly more likely (51%) to state that they take up to 60 hours a year to comply than those in the wholesale and retail sector (47%).

Figure 14: Approximate amount of time that small businesses spend on complying with regulatory requirements per year* FSB regulation survey 2025

Number of employees

Average amount of hours spent on compliance per year

None

45 hours

1 to 9

68 hours

10 or more

93 hours

* The average is calculated by taking the midpoint of all the categories in available answers and then calculating the total sum based on response rates.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Our research shows that there is a clear relationship between the time that businesses spend on compliance, and the perceived regulatory burden.

Small businesses that say that they spend more than 100 hours a year on compliance are also more likely (86%) to say that at least one type of regulation is burdensome, compared with three quarters (74%) of those that spend 60 hours or less a year on compliance. This is also the case for different types of regulation that small businesses find burdensome.

For example, small businesses are twice as likely to say that they find employment law burdensome if they spend more than 100 hours on compliance (49%), compared with a quarter (24%) of those that spend 60 hours or less on compliance. This is also the case for data protection where three in ten small businesses that spend more than 100 hours on compliance are more likely to say that they find this type of regulation burdensome (31%) than those that spend 60 hours or less a year (25%).

The complexity of complying with regulation across devolved nations is also a concern for small businesses, with small businesses that operate across the UK also expressing frustration around complying with requirements across nations.

Aside from the administrative burden in terms of time, the financial cost of compliance is also a significant area of concern for many small businesses. Our research shows that small businesses spend an average of £6,300 per year complying with regulatory requirements.

Unsurprisingly, the cost of complying with regulatory requirements increases with the size of the business.

Our research shows that sole traders are more likely to spend less than £1,000 per year (39%) than small business with one to nine employees (14%). Small businesses with one to nine employees are more likely (44%) than sole traders (32%) to say that they spend between £1,001 and £7,500 per year. Small businesses with 10 or more employees are more than twice as likely (56%) than businesses with one to nine employees (25%) to say that they spend £7,501 or more on complying and familiarising themselves with regulatory requirements per year. Some small businesses in our research also highlighted difficulties with estimating the financial cost of compliance, particularly in areas where there are little to no fees, and where the majority of the cost of compliance relates to their working hours.

“It’s hard to put a price on it because it’s something you have to do out of business hours, and you take up your leisure time doing compliance, doing things that you know probably should be done by the business, but you can’t afford to, because the business isn’t big enough to do it, and isn’t big enough to stand it. I would imagine the same goes for small businesses doing their payroll, doing their VAT returns, doing the food hygiene. All of these things as a small business owner tend to take up your personal time, rather than doing them during the time when you’re supposed to be working.”

FSB member, Financial services, North West England

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Figure 15: Cost of complying with regulatory requirements per year by number of employees* FSB regulation survey 2025

*

Number of employees

Average financial cost of compliance

None

£2,500

1 to 9

£6,200

10 or more

£12,600

he average is calculated by taking the midpoint of all the categories in the available answers and then calculating the total sum based on T response rates.

Our research shows that there is a relationship between the financial cost of regulatory requirements and how burdensome a business finds regulation. Small businesses are more likely to find at least one type of regulation burdensome if they spend £7,500 or more on compliance a year (92%) than those that spend less than £1,000 (53%).

This trend is also evident when looking at some specific types of regulation that small businesses find burdensome. For example, small businesses are more likely to find employment law burdensome if they spend more than £7,500 on compliance per year (50%), than those who spend £1,000 to £5,000 (35%). This is also the case for data protection where small businesses that spend more than £7,500 (34%) on compliance a year are more likely to say that they find it burdensome than those who spend £1,000 to £5,000 per year (27%).

Of those that report a financial cost in relation to complying and familiarising themselves with regulatory requirements, almost a quarter (23%) say that the majority of costs come from filling out assessments or paperwork and submitting information about business activities. A fifth (20%) say that the majority of the cost relates to external advice and support to help with compliance, and around one in 10 say that the costs are driven by regulator fees, and the time that it takes to read guidance documents (both 11%). Of those that selected “other” as an option (4%), most say that the costs derive from outsourcing various parts of the business or are spread across all or a majority of the options listed. fsb.org.uk

“It’s the reading through and understanding of the regulations.

It might take five or ten minutes to actually fill the form out, but it takes two or three hours to read and understand what you are required to do. [We could do with] more help in that side of things, helping small businesses to complete all these [forms], or raising the threshold on the businesses that have to actually comply with these regulations. Some of it just doesn’t make any sense for a business our size to do. The cost is time, and that’s the most important thing for a business owner.”

FSB member, Accommodation services, Yorkshire and the Humber

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

“It’s regulation run riot. It’s regulation for the sake of regulation. It’s like a snowball. One lot of paper leads to another. It’s a huge amount of form-filling.”

FSB member, Creative design industry, East of England

Figure 16: Biggest drivers of financial cost when complying with regulatory requirements for small businesses FSB regulation survey 2025 Filling in and submitting information about business activities

23%

External advice/support to help comply

20%

Regulator fees

11%

Time to read guidance documents

11%

Figuring out how to comply without external support

8%

Obtaining licences/permits

7%

Updating business policy

5%

Preparing for inspections

5%

Having to provide the same information more than once Lack of alignment with other international markets, e.g. EU

3% 2%

Regulator fines 0% Other Don’t know 0%

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4% 2% 5%

10%

15%

20%

25%

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Opportunities for regulatory reform and growth

For many years small businesses have looked to the Government to reduce the regulatory burden, and there have been a number of attempts to do so. From regulatory offsetting measures such as ‘one-in-one-out’, where if one regulation were to be created another would need to be cut, later expanding to ‘one-in-two-out’, to the introduction of the Business Impact Target (BIT) which sought to reduce the burden by setting a target to reduce the cost of regulation on businesses, with varying degrees of success. For example, the Regulatory Policy Committee (RPC)’s assessment suggests that the BIT in fact led to an increase in direct costs to businesses, due to a lack of commitment in meeting the target and exemptions for significant policy areas, and as for regulatory offsetting, the disproportionate impact of some regulation can be more difficult to balance for some than for others in the same sector.44, 45 Looking forward, the Government’s promise to reduce the administrative burden on businesses will require the Government to learn the lessons of previous approaches, in order to achieve the most impact, and reduce the likelihood of unintended consequences. The Government should not be afraid to shake up the policymaking process and assessment of its impact in order to achieve its set target of a 25 per cent reduction in regulation in this parliament. The RPC has offered to help the Government achieve this pledge given its experience in this area, which we support as independent verification of cost reduction would help to achieve the policy’s aims.46

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Government research has previously highlighted that, following competition in the market and utility or other business costs, regulation and red tape are next-most frequently mentioned by businesses as an obstacle to their success.47 Small businesses in our research also expressed concern about their ability to effectively compete in the market with larger and more established businesses due to regulatory burden.

“Larger businesses, the big corporations, they actually want more bureaucracy, and the more regulation there is, it suits them because they have a big legal department, a big HR department. It helps them discourage any competition from smaller players because they can deal with all this stuff, and for us as small business owners it’s a lot more onerous and a lot more complicated.”

FSB member, Industrial cleaning machinery business, Yorkshire and the Humber

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Benefits of reducing the regulatory burden Our research shows that the current trading environment is unforgiving for many small businesses. FSB’s Small Business Index for Q3 2025 found that, for the second consecutive time in the research series’ history, the proportion of small firms expecting to shrink, close or sell up in the next 12 months outweighed the proportion who predicted their business would expand.48 The same research showed a similar vein of pessimism towards revenue growth for the next quarter, with almost half (49 per cent) of small firms predicting their revenues would decrease, and only around a fifth (21 per cent) saying that they will likely increase. Therefore, with revenues falling and tighter budgets, it is not

surprising that half of all small business owners would reinvest any savings from regulation into their business.

Our research shows that small businesses could see potential benefits to their business if the regulatory burden were to be reduced. Out of small businesses that cite a cost to their business from complying with regulatory requirements, 93 per cent say that if the cost were reduced, it would have at least one positive impact on their business, with the most common impacts cited being putting the savings back into their business to manage cashflow (50%), investing in staff training or upskilling (32%), and investing in hiring new apprentices or staff (32%).

Figure 17: Small business views on impact on business if cost (time or money) of complying with regulatory requirements were reduced FSB regulation survey 2025 Reinvest into my business to manage cashflow

50%

Invest in staff training/upskilling

32%

Invest in hiring new apprentices/staff

32%

Invest in new technology

25%

Pay off business debt

22%

Invest in assets/capital

21%

Expand my business into other sectors

20%

Contribute to my/my staff’s pension/retirement

15%

Invest in green technology/ decarbonise my business

11%

Expand my business through imports/exports

10%

Other Don’t know None of the above

4% 7%

0%

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6%

10%

20%

30%

40%

50%

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

The decision around where the savings attributed to a reduction in the regulatory burden would go varies according to the size and turnover of the business.

Small businesses with a turnover of up to £100,000 per year are slightly more likely (54%) to say that they would put the savings back into their business to manage cash flow than those with a turnover of £100,001 - £500,000 (46%), or £500,001 or more per year (50%).

Small businesses with 10 or more employees are more likely to say that they would invest in staff training or upskilling (59%) and invest in hiring new apprentices or staff (49%) than those with one to nine employees (both 34%). This is not surprising, as our Small Business Index Q3 2025 research found that over the next three months, businesses with 10-49 employees were more likely to say that the number of employees on their payroll would decrease (36%) than those with one to nine employees (25%), so if the regulatory burden was reduced it would likely help restore small business investment in their employees to previous levels, particularly for those that have been affected by cost pressures across the economy as a whole.

Small businesses in our research that say at least one type of regulation is burdensome also set out their priorities for how the impact of regulation could be mitigated or reduced for their business. The majority of small businesses (70%) say that one of their top three ways to reduce the impact of regulation would be to introduce simplified requirements for small businesses, followed by clearer guidance including tailored language and formats for small businesses (38%), and less prescriptive regulations (25%). This is similar to our 2017 regulation research, which also found that most small businesses would like to see simplified requirements (73%), followed by partial exemptions (45%), more discretion about meeting requirements (42%), and simpler and clearer guidance (41%).49

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Small businesses in our research also expressed the need for financial help as a way of reducing the impact of regulation and supporting their ability to grow and compete.

“If business owners have to spend some time enacting [regulatory] changes, reading the documentation, reading the regulations and understanding them, they should give us some financial help on that, or some reduction on taxes or something like that. The Government needs a sort of an incentive, like the more regulation they impose on small businesses, then they should give businesses a greater break in taxation to accommodate the extra work that we have to do, and that would then be a disincentive for them to pile more and more regulation on small businesses. If they then have to reduce [regulation], there’ll be less revenue from small businesses, because we will be allowed to keep more of it as we will have to do all the work, so that that might be an idea to stop the Government imposing more and more regulation on small business.”

FSB member, Accommodation services, Yorkshire and the Humber

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Figure 18: How could the impact of regulation on your business be reduced?

FSB regulation survey 2025 33%

Simplified requirements for small businesses

70% 12%

Clearer guidance incl. tailored language and formats

38% 10%

Less prescriptive regulations

25%

Regular review of effectiveness of regulations

5%

Make it easier to challenge regulatory decisions

6%

Better online services to upload/ view regulatory information

5%

More discretion for inspectors and enforcement

4%

Better co-ordination between different regulatory agencies

4%

More time to prepare for regulation before it comes into force

5%

22%

18%

17%

14%

13%

13%

More consistency in inspection and enforcement

3%

More alignment with other key markets, e.g. EU

4%

12%

9% 2%

Fewer inspections overall

More prescriptive regulations

Other

5% 1% 2% 1%

0%

7% 10% Top 1

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20%

30%

40%

50%

60%

70%

80%

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Potential to reform the regulatory system as a whole We welcome the Government’s commitment to cut administrative costs for business by 25 per cent by the end of Parliament, and as part of that effort, to create a regulatory system which is easier to navigate for businesses and which reduces duplication. In October 2025, the Government published a progress update on the Regulation Action Plan, which estimated that the baseline for the administrative burden of regulation on businesses to be at “£22.4bn a year, which means that the Government’s target is to reduce the annual administrative burden of regulation by £5.6bn by the end of Parliament.”50 However, there are concerns that this is a significant underestimate, not least due to the calculations which mirror the 2005-10 ‘Simplifying Regulation’ burden reduction exercise, and do not appropriately take into account the increase in the regulatory burden since then.51 Our own research shows that the total financial cost of complying with regulation for only SMEs stands at approximately £36 billion and 379 million hours, which means that a 25 per cent reduction would mean a total of £9 billion in financial cost and 94.7 million hours which could be saved if that target were to be achieved.* FSB believes that a significant part of the solution for estimating the administrative burden is to understand how administrative costs relate to different types of businesses, and how the administrative burden itself is best measured. While the best estimate of such costs could be in the options or impact assessments that the Government produces for any new regulation that it takes forward which meets the threshold of ‘equivalent annual net direct cost to business’ (EANDCB), there could be significant gaps for a number of reasons. These could include requirements passed through secondary legislation which do not meet the threshold for an impact assessment, legislation that was introduced prior to impact assessments being required, or impact assessments which cover a number of *

policies, which are more difficult to track. The overall accuracy of impact assessments in estimating net costs to businesses has also been contested.52, 53 The majority (83%) of small businesses in our research say that the Government does not understand the impact of specific regulatory requirements on small businesses, and around the same amount (82%) do not think that the Government understands the cumulative costs of regulation on businesses. This perceived lack of ability to estimate exact costs for businesses, particularly small and micro businesses, can also be highlighted in some specific policy contexts; for example, the impact assessment for the Employment Rights Bill at the time received a red rating from Government’s scrutiny body, outlining that:

“At this stage of policy development, it is not possible to outline specific mitigations to administrative and compliance costs, but these will be considered through policy development of the secondary legislation.”54 UK Government, Employment Rights Bill: Economic Analysis We recognise that there could be some difficulty in estimating costs for businesses, including small businesses; however, this is why it is critical to consult appropriately and consider small business views prior to taking any decision to regulate. The Government’s decision to impose regulation without a credible plan to mitigate the regulatory costs on small businesses is an illustration of why successive governments have not been able to reduce the regulatory burden. If this Government is to be the first one to actually reduce the burden of regulation, then it cannot treat regulatory costs for small businesses as an afterthought.

The 25 per cent saving is calculated from the total average cost and time of compliance per business in this research multiplied by the size of the SME business population in the UK.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

The same Employment Rights Bill impact assessment also outlines that the cost and administration burden is likely to be greater for small and micro businesses. This is why one of our main concerns around reducing the administrative burden by 25 per cent is that for small businesses which are disproportionately affected by regulatory burdens, any reduction in the administrative burden is likely to look different than it will for their larger counterparts, particularly when requirements applied by legislation are the same for small as well as large businesses, and therefore their impact may not be proportionate.

A most recent example of this is the requirement for small companies to submit full profit and loss accounts to Companies House, introduced through the Economic Crime and Corporate Transparency Act 2023.55 While larger businesses have been legally required to submit full accounts for many years, small companies were exempted, provided they met small company thresholds. This exemption is particularly important for small businesses that are just starting out and whose income is likely to fluctuate, because if accounts are made public, it could risk competitors, suppliers and customers forming an unfairly negative view and reconsidering doing business with them. Therefore, an equivalent requirement to a larger business in this case will not only add a disproportionate administrative burden, but also significant implications for the ability of a small businesses to conduct its operations and grow. Instead, Government departments should look to address existing duplication, such as the requirement for businesses to submit accounts to both HMRC and Companies House, as publication and submission of accounts to separate entities could increase the risk of economic crime and fraud, which is what the regulation was supposed to tackle in the first place.

Justin Madders, the former Minister for Employment Rights, Competition and Markets, discussed the 25 per cent reduction in the administrative regulatory burden as part of an evidence session in Parliament about the role of regulators:

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“Our view is that there is a need to reduce the regulatory burden. We have a target of 25 per cent, but putting that into crude numbers of regulations does not necessarily achieve the outcome that we want. It is more the administrative burden overall that we are thinking of.

Is that particular piece of form-filling required? Is there a quicker and more efficient way it can be done? Are people having to submit lots of information to different agencies when it could all be done in a much more coherent way?

“This 25 per cent target is based on a similar exercise that the EU has done.

Last time we were in government, there was a similar amount reduced in regulatory burden. I do not think we would want to be saying that it will mean that x or y number of regulations will be removed; it is about the overall impact on businesses.”56 Justin Madders, the former Minister for Employment Rights, Competition and Markets at the Business and Trade Committee’s oral evidence session on the role of regulators The same session discussed what baselining the cost of administrative requirements would look like, with the then-Minister suggesting that this would likely take around 18 months, and publication of how much the administrative burden of regulation costs the UK economy could therefore be expected in the first half of 2027. However, instead the baseline and the calculations were published in October 2025 in the Regulation Action Plan progress update.57 Given the reasons previously mentioned within this report, it is not surprising why other countries have taken the decision to implement a separate target for administrative regulatory reduction specifically for small businesses. For example, the EU Commission has pledged to reduce the administrative burden for 50

Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

businesses by 25 per cent, although its target is set higher for smaller businesses, at 35 per cent.58 FSB would like to see Government departments establish a separate target for a reduction in the administrative regulatory burden specifically for small businesses alongside the SME procurement target which is currently 33 per cent.

The Regulation Action Plan also commits to creating a regulatory environment that reduces duplication.

A significant part of the burdensome nature of regulatory compliance can be duplicative and unnecessary requirements that businesses need to comply with, which can cause frustration for small businesses who are already over-stretched.59 Duplicative or unnecessary requirements can be

particularly frustrating for small businesses to deal with and add to the regulatory burden without any benefit to the business or its employees. On average, our research shows that small businesses believe that3 2 per cent of unnecessary or duplicative requirements could be reduced without compromising policy objectives. Around three-tenths (29%) of small businesses in our research say that up to 20 per cent of unnecessary or duplicative regulatory requirements could be reduced without compromising policy objectives. Meanwhile, 17 per cent say that 21 to 40 per cent of regulatory requirements could be reduced, and just under a fifth (19%) say that 41 per cent or more could be cut.

Figure 19: Small businesses’ estimates of the percentage of unnecessary or duplicative regulatory requirements that could be reduced without compromising policy objectives FSB regulation survey 2025

3%

29%

0%

11%

1-20%

21 - 30%

6%

31 - 40%

Scrapping regulations that are no longer viewed as necessary through sunsetting has also proven difficult in the absence of appropriate internal review processes, and with unrealistic timelines, not least as illustrated by the Retained EU Law (Revocation and Reform) Act 2023, which prior to becoming law scrapped its controversial sunset clause, which would have required the Government to scrap any EU legislation from the statue book within a year, placing an undue burden on departments.60 It also proved to be somewhat controversial given the lack of guidance around what internal review processes departments should employ to undertake appropriate assessments.61 With that said, other fsb.org.uk

19%

41% or more

31%

Don’t know

countries have had more radical approaches to sunsetting; for example, in the US state of Florida a requirement was implemented for a sunset clause of five years to be incorporated for all new rules, after which they would need to be reviewed or submitted for review to their regulatory reform body. In Texas, a commission was established specifically to review all Texan agencies within its mandate every 12 years, and as part of that it advised on whether to renew or abolish each agency, based on its effectiveness, transparency of work and whether it duplicated some of the work of other government bodies.62 However, often these approaches take some time to see results.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

More recently, there have also been some private sector solutions to reducing the burden of regulation by using technology to identify the number and scope of regulations that are affecting a specific area, and allowing the data to be extracted to tailor and build specific tools to help navigate complex regulatory areas. For example, Deloitte has developed RegExplorer, which uses Augmented Intelligence in combination with human review to help streamline regulatory requirements.63 Another significant part of reducing regulatory burdens is considering more effectively the alternatives to regulation. The Regulatory Policy Committee (RPC) is the independent scrutiny body for the UK Government, and its role is to scrutinise the Government’s regulatory proposals based on the quality of their evidence, in line with the Better Regulation Framework. The Better Regulation Framework is the system which is used by the Government to better understand the impact of regulation and manage its flow.64 In 2023, it was amended to focus scrutiny at the earlier stage of the policy development process, i.e. at the options assessment (OA) stage where different approaches for intervention are considered, with a renewed focus on monitoring and evaluation, as well as a commitment to post-implementation reviews.65 A significant part of the RPC’s assessment is the Small and Medium Business Assessment (SaMBA),* which helps to assess the impact of regulatory proposals on small and micro businesses.66 Alongside the SaMBA, the Better Regulation Framework also expects departments to consider whether medium-sized businesses (which it defines as having 50 to 499 employees) should also be exempt from regulation and how any impact on them could be mitigated. It is critical that departments are able to explore appropriately any non-regulatory options before putting forward any decision to regulate, as it could be that their aims would be more effectively executed by other means, with less of a risk of a disproportionate negative impact on small businesses.

The Better Regulation Framework sets out the reasoning for conducting SaMBAs:

“In addition to the large volume of smaller businesses, a number of factors mean that regulatory changes may fall disproportionately on them.

As a result, the Government has committed to considering whether the impacts of regulatory changes will fall disproportionately on them, and whether such businesses could be exempted from regulation, or the impacts mitigated in some way without compromising the policy objectives.”

Department for Business and Trade, Better Regulation Framework While the Better Regulation Framework is helpful in encouraging Government departments to consider their options more carefully, it also has a number of exemptions and thresholds that need to be met in order for that assessment and for RPC scrutiny to take place. For example the regulation needs to have a significant impact on businesses, which is measured by being greater than +/-£10 million equivalent annual net direct costs on business (EANDCB), and seven exclusions ranging from court judgments, to international obligations, to regulatory provisions imposing fines and penalties.67 However, perhaps most significant is that the Better Regulation Framework is only for statutory provisions made by ministers on behalf of regulators, rather than by regulators themselves. It is only recommended within the guidance that, where regulators make Regulatory Provisions, they should follow the Better Regulation Framework where possible. One piece of research found that out of over 1,200 regulations that were studied, relating to seven regulatory bodies including Natural England, Ofcom, the Financial Conduct

* It is worth nothing that devolved governments also have their own assessments for measuring impact of regulation on devolved policy – for example, in Northern Ireland, the Small and Micro Business Impact Test (SAMBIT) is used as part of the Regulatory Impact Assessment (RIA) process.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Authority (FCA), the Food Standards Agency (FSA), the Competition and Markets Authority (CMA), the Financial Reporting Council (FRC), and the Care Quality Commission (CQC), fewer than two in ten new regulations had had an impact assessment.68 As part of the Better Regulation Framework, Government departments are also required to conduct post-implementation reviews no later than five years after implementation, which help to assess whether regulations are operating as intended.

However, in April 2025 the RPC published a review of post-implementation reviews, which found that there were 85 outstanding post-implementation reviews, of which over 40 per cent related to Department for Transport measures.69 The same review highlighted departmental commitments to clearing the backlog, and in December 2025 the RPC published an update on progress which stated this has now reduced from 85 to 47 outstanding postimplementation reviews.70 It is little surprise that departments do not want to devote resources to such reviews unless there is a credible case for reducing regulation. Our research shows that small businesses want to see better reviews of the effectiveness of regulation, with just over a fifth (22%) saying that regular reviews of the effectiveness of regulations to achieve objectives

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would help to mitigate the burden of regulation. For this reason, we believe that it would be beneficial for the Government to conduct Thematic Regulatory Reviews, which would look at all relevant regulations within a specific area or issue, rather than reviewing regulations individually, to get a broader view of their effectiveness. We have seen this approach be undertaken by the Government with regard to licensing reform, and would like to see this expanded to other areas.71 This would also be helpful in reducing regulatory burdens within that theme by at least 25 per cent.

Finally, small businesses as part of our research also called for better representation of small businesses within the Government. A signal from the Government to reduce regulatory impacts at a senior level would be beneficial and help focus objectives as well as promote accountability of departments to follow suit. FSB has also previously called for Cabinet level responsibility for reducing regulatory requirements and tracking progress.72 In Scotland, FSB worked with the Scottish Government to redraft the Business and Regulatory Impact Assessment (BRIA) so that more scrutiny of the impact of new policies and regulations on small businesses specifically is carried out before their introduction.73

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

RECOMMENDATIONS • The UK Government should publish a register of regulations to help small businesses identify which regulations are relevant to them and help them comply with any requirements. A register of regulations will help focus departments on the stock of regulation, assist with setting a baseline for the administrative regulatory burden, and identify any regulations which no longer serve their purpose. In addition, the register of regulations should be searchable according to sector and region through the new Business Growth Service. Once a register of regulations is published, it would also make it easier in the future to establish appropriate feedback processes as part of post-implementation reviews, as well as any future reform of regulations.

costs for businesses, as the net cost to businesses targeted is only an estimate and, in reality, costs are disproportionately higher, especially for small businesses. .

• The UK Government should bring groups of regulations together and conduct Thematic Regulatory Reviews, rather than reviewing regulations individually, with the aim of reducing the regulatory burden within each theme by at least 25 per cent. Each of these Thematic Regulatory Reviews should have a Senior Responsible Owner (SRO), from the Senior Civil Service, and there should be a parliamentary committee which holds the SROs to account. This will provide better oversight of the current state of the regulatory environment, and allow for better decisionmaking around how to reduce the regulatory burden on businesses.

• The UK Government should amend the Better Regulation Framework to ensure that any decision to regulate is appropriately scrutinised, removing the equivalent annual net direct cost to businesses (EANDCB) threshold of £10m. It does not make sense that some regulation does not follow an appropriate scrutiny process by the Regulatory Policy Committee (RPC) to potentially lower fsb.org.uk

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

.

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.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Methodology The research that this report is based on was twofold. It consisted of a survey of small businesses, along with focus groups and one-to-one interviews to better understand the experiences and views of FSB members about the regulatory landscape.

Members (and other small business owners) were asked to participate in the research through email invitations. The focus groups took place via Zoom on 15th, 16th and 28th April 2025, and the participants were sourced through recontact data from the survey.

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The survey was administered by the research agency Verve and was in the field from 15th January – 3rd February 2025. The survey received 631 responses and the findings were weighted to make them representative of FSB membership. All percentages have been rounded to the nearest percentage point, which is why some of them may not add up to 100 per cent.

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Playing by the Rules: How to reduce the cost and time small businesses spend on regulatory compliance

Endnotes 1

I ndustry and Regulators Committee, Who watches the watchdogs? Improving the performance, independence and accountability of UK regulators, 2024 https:// publications.parliament.uk/pa/ld5804/ldselect/ ldindreg/56/5602.htm 2 Gov.uk, Product safety advice for businesses, December 2024 https://www.gov.uk/guidance/ product-safety-advice-for-businesses 3 ICO, Advice for small and medium organisations [accessed June 2025] https://ico.org.uk/fororganisations/advice-for-small-organisations/ 4 The Insolvency Service, Director information hub, July 2023 https://www.gov.uk/guidance/ director-information-hub 5 Ibid.

6 HM Treasury, New approach to ensure regulators and regulation support growth, March 2025 https://www.gov.uk/government/ publications/a-new-approach-to-ensureregulators-and-regulation-support-growth/ new-approach-to-ensure-regulators-andregulation-support-growth-html 7 Newcastle University, University of Birmingham and FSB, Navigating the COVID_19 Regulatory Landscape: How small businesses experienced regulations in a crisis, 2022 https://www.fsb. org.uk/resources/policy-reports/navigatingthe-covid-19-regulatory-landscapeMCSUI7URWLGFACBIVCI4HYPPGQY4 8 FSB report, The Tech Tonic: Shifting the ground on tech adoption and innovation in small businesses, 2023 https://www.fsb.org. uk/resources/policy-reports/the-tech-tonicMCKYQV5I5XCFGN5G7G6KKLGSLC7E 9 FSB press release, “Regulators must get onboard with small business growth agenda”, 2025 https://www.fsb.org.uk/media-centre/ press-release/regulators-must-get-onboard-with-small-business-growth-agendaMC42QGCUKZOFFW7CURGJH7IHCWMA 10 FSB report, Net Benefits? Small business use of online platforms, 2023 https://www.fsb. org.uk/resources/policy-reports/net-benefitsMCKVWHVB4GABEO7OPCA4JQTPFYJ4

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11 H M Treasury, Regulation Action Plan - Progress Update and Next Steps, October 2025 https:// www.gov.uk/government/publications/a-newapproach-to-ensure-regulators-and-regulationsupport-growth/regulation-action-planprogress-update-and-next-steps 12 FSB report, Redefining Intelligence: The growth of AI among small firms, 2024 https://www.fsb.org.uk/resources/ policy-reports/redefining-intelligenceMCKHTFHSTCMVGF5BPKCDHVF73FGU 13 Digital Regulation Cooperation Forum (DRCF), DRCF to develop “one-stop” digital regulatory tool to break down barriers for innovators, 2025 https://www.drcf.org.uk/news-and-events/news/ drcf-to-develop-one-stop-digital-regulatorytool-to-break-down-barriers-for-innovators 14 HM Treasury, New approach to ensure regulators and regulation support growth, 2025 https://www.gov.uk/government/ publications/a-new-approach-to-ensureregulators-and-regulation-support-growth/ new-approach-to-ensure-regulators-andregulation-support-growth-html 15 House of Lords Industry and Regulators Committee, Who watches the watchdogs?, 2024 https://committees.parliament.uk/ publications/43211/documents/215050/default/ 16 FSB report, Regulation returned: What small firms want from Brexit, 2017 https://www.fsb.org.uk/resources/ policy-reports/regulation-returnedMCHCGZBIUFCFHTLGNNQX3Q7QWKXQ 17 Department for Science, Innovation and Technology (DSIT), Game-changing tech to reach the public faster as dedicated new unit launched to curb red tape, 2024 https://www. gov.uk/government/news/game-changing-techto-reach-the-public-faster-as-dedicated-newunit-launched-to-curb-red-tape 18 Regulatory Innovation Office: One Year On, October 2025 https://www.gov.uk/government/ publications/regulatory-innovation-officereport-one-year-on/regulatory-innovationoffice-one-year-on-html

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19 D epartment for Business and Trade, The UK’s Modern Industrial Strategy, 2025 https://assets.publishing.service.gov.uk/ media/68595e56db8e139f95652dc6/ industrial_strategy_policy_paper.pdf 20 HM Treasury, A new approach to ensure regulators and regulation support growth, 2025 https://www.gov.uk/government/publications/anew-approach-to-ensure-regulators-andregulation-support-growth 21 Department for Business, Innovation and Skills (now DBT), Regulators’ Code, 2014 https://www.gov.uk/government/publications/ regulators-code 22 Ibid.

23 Department for Business and Trade and Department for Business, Energy and Industrial Strategy, Growth Duty, 2024 https://www.gov. uk/government/publications/growth-duty 24 Department for Business and Trade, Business population estimates for the UK and regions 2025: statistical release, 2025 https://www.gov. uk/government/statistics/business-populationestimates-2025/business-populationestimates-for-the-uk-and-regions-2025statistical-release 25 HM Treasury, Regulation Action Plan - Progress Update and Next Steps, October 2025 https:// www.gov.uk/government/publications/a-newapproach-to-ensure-regulators-and-regulationsupport-growth/regulation-action-planprogress-update-and-next-steps 26 National Audit Office, Regulating for Growth, [accessed June 2025] https://www.nao.org.uk/ work-in-progress/regulating-for-growth/ 27 National Audit Office, Regulating for Growth, 2026 https://www.nao.org.uk/wp-content/ uploads/2026/01/Regulating-for-growth.pdf 28 Business and Trade Committee, Oral evidence: The role of regulators, 2025 https://committees. parliament.uk/oralevidence/16346/pdf/ 29 ICO, The UK GDPR [accessed July 2025] https:// ico.org.uk/for-organisations/data-protectionand-the-eu/data-protection-and-the-eu-indetail/the-uk-gdpr/

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30 D epartment for Business, Energy & Industrial Strategy, Challenges businesses face when complying with regulation, 2020 https://assets.publishing.service.gov. uk/media/5fd8d264e90e071be9196fe2/ challenges-businesses-face-when-complyingwith-regulations.pdf 31 FSB press release, “Pace of AI adoption means Government and education system have to catch-up fast, say small firms”, 2024 https:// www.fsb.org.uk/media-centre/press-release/ pace-of-ai-adoption-means-government-andeducation-system-have-to-catch-up-fastMCWW5ZRBPHABA3LAKK5YONCSC7TM 32 FSB report, Backing the Future, Recognising the importance of small firms in shaping pensions policy, June 2025 https://www.fsb.org.uk/ resources/policy-reports/backing-the-futureMCX4PU54W3MFDGTICJPOCURZH7XU 33 FSB report, Data Ready: Mitigating the impact of data protection regulation on small businesses, 2018 https://www.fsb. org.uk/resources/policy-reports/data-readyMCJPVECAIWEZAE5K5DJWG4R5B6PQ 34 ICO, The Data Use and Access Act 2025 (DUAA) - what does it mean for organisations?, June 2025 https://ico.org.uk/about-the-ico/ what-we-do/legislation-we-cover/data-useand-access-act-2025/the-data-use-andaccess-act-2025-what-does-it-mean-fororganisations/ 35 Note: this does not apply to Northern Ireland, where the Good Jobs Employment Rights Bills is set to be introduced in 2026.

36 Employment Rights Bill [accessed July 2025] https://bills.parliament.uk/bills/3737 37 FSB press release, “New research shows scale to which Labour’s employment plan will harm jobs, lock people out of work and cause spiralling benefits bill”, 2025 https:// www.fsb.org.uk/media-centre/press-release/ new-research-shows-scale-to-which-labours-employment-plan-will-harm-jobs-lock-pMCBJELDTY47NE53M57XBTX3AIUOY 38 Department for Business and Trade, An update on the Employment Rights Bill, 2025 https:// www.gov.uk/government/news/an-update-onthe-employment-rights-bill

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39 Companies House, Companies House fees increasing from 1 May 2024, 2024 https:// www.gov.uk/government/news/companieshouse-fees-increasing-from-1-may-2024 40 Companies House, Companies House fees are changing from 1 February 2026, 2025https://www.gov.uk/government/news/ companies-house-fees-are-changing-from-1february-2026 41 DSIT and ICO, Data protection fee regime: government response, 2025 https://www.gov. uk/government/consultations/data-protectionfee-regime-proposed-changes/outcome/dataprotection-fee-regime-government-response 42 FCA, FCA fee rate movement 2025/26, 2025 https://www.fca.org.uk/firms/fees-and-levies/ fee-movements 43 FSB press release, “For first time, more small firms expect to shrink than grow – FSB report”, 2025 https://www.fsb.org.uk/media-centre/ press-release/for-first-time-more-small-firmsexpect-to-shrink-than-grow-fsb-reportMCE6YQJ2KESVDRHDLFQOXFX5T32Y 44 Regulatory Policy Committee Blog, OneIn, Some-Out: should government set itself a target or control framework to reduce regulatory impacts?, 2021 https://rpc.blog. gov.uk/2021/09/24/one-in-some-out-shouldgovernment-set-itself-a-target-or-controlframework-to-reduce-regulatory-impacts/ 45 Social Market Foundation, Reducing the burden of government regulation, 2023 https://www. smf.co.uk/publications/reducing-regulationburden/ 46 Regulatory Policy Committee Blog, RPC offers to help Government achieve a 25% reduction in the administrative costs of regulation, 2025 https://rpc.blog.gov.uk/2025/03/20/rpc-offersto-help-government-achieve-a-25-reductionin-the-administrative-costs-of-regulation/ 47 Department for Business and Trade, Longitudinal Small Business Survey 2023: businesses with no employees, 2024 https:// www.gov.uk/government/statistics/smallbusiness-survey-2023-businesses-with-noemployees/longitudinal-small-business-surveybusinesses-with-no-employees-uk-2023

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48 FSB press release, “Small business growth hopes plunge – Chancellor must act in Budget”, 2025 Press Release | Small business growth hopes plunge – Chancellor must act in Budget 49 FSB report, Regulation returned: What small firms want from Brexit, 2017 https://www.fsb.org.uk/resources/ policy-reports/regulation-returnedMCHCGZBIUFCFHTLGNNQX3Q7QWKXQ 50 HM Treasury, Regulation Action Plan – Progress Update and Next Steps, October 2025 https:// www.gov.uk/government/publications/a-newapproach-to-ensure-regulators-and-regulationsupport-growth 51 Centre for Policy Studies, Axing the Admin?, 2025 https://cps.org.uk/research/axing-theadmin-briefing/ 52 Centre for Policy Studies, The Future of Regulation, 2024 https://cps.org.uk/wp-content/ uploads/2024/04/The-Future-of-RegulationFINAL.pdf 53 Secondary Legislation Scrutiny Committee, Why the Government’s impact assessment system is failing Parliament and the public – Lords Committee, 2022 https://committees. parliament.uk/committee/255/secondarylegislation-scrutiny-committee/news/173450/ why-the-governments-impact-assessmentsystem-is-failing-parliament-and-the-publiclords-committee/ 54 UK Government, Employment Rights Bill: Economic Analysis, 2024 https://bills.parliament. uk/publications/59798/documents/6233 55 Economic Crime and Corporate Transparency Act 2023 https://www.legislation.gov.uk/ ukpga/2023/56 56 Business and Trade Committee, Oral evidence: The role of regulators, 2025 https://committees. parliament.uk/oralevidence/16346/pdf/ 57 HM Treasury, Regulation Action Plan - Progress Update and Next Steps, October 2025 https:// www.gov.uk/government/publications/a-newapproach-to-ensure-regulators-and-regulationsupport-growth/regulation-action-planprogress-update-and-next-steps

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58 European Commission, Commission proposes to cut red tape and simplify business environment, 2025 https://commission.europa. eu/news-and-media/news/commissionproposes-cut-red-tape-and-simplify-businessenvironment-2025-02-26_en 59 HM Treasury, New approach to ensure regulators and regulation support growth, 2025 https://www.gov.uk/government/ publications/a-new-approach-to-ensureregulators-and-regulation-support-growth/ new-approach-to-ensure-regulators-andregulation-support-growth-html 60 House of Commons Library, Research Briefing: Retained EU Law (Revocation and Reform) Act 2023, 2023 https://commonslibrary.parliament. uk/research-briefings/cbp-9841/ 61 Social Market Foundation, Reducing the burden of government regulation, 2023 https://www. smf.co.uk/publications/reducing-regulationburden/ 62 Policy Exchange, The Rise of Regulators: Reversing the Risk Aversion Ratchet, 2024 https://policyexchange.org.uk/wp-content/ uploads/The-Rise-of-the-Regulators_.pdf 63 Deloitte, Regulatory Explorer [accessed September 2025] https://www. regulatoryexplorer.com/landing 64 Department for Business and Trade, Better Regulation Framework, 2024 https://www.gov. uk/government/publications/better-regulationframework 65 Department for Business and Trade, Sending an options assessment to the Regulatory Policy Committee for scrutiny, 2025 https://www.gov. uk/government/publications/better-regulationframework/sending-an-options-assessment-tothe-regulatory-policy-committee-for-scrutiny 66 Regulatory Policy Committee, RPC Small and Micro Business Assessment (SaMBA) guidance, 2019 https://www.gov.uk/government/ publications/small-and-micro-businessassessment-samba-guidance

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67 Department for Business and Trade, Better Regulation Framework, 2023 https://assets.publishing.service.gov.uk/ media/67587ba55a2e4d4b993bfa83/betterregulation-framework-guidance-2023.pdf 68 Policy Exchange, The Rise of Regulators: Reversing the Risk Aversion Ratchet, 2024 https://policyexchange.org.uk/wp-content/ uploads/The-Rise-of-the-Regulators_.pdf 69 Regulatory Policy Committee blog, RPC publishes league table of departments lagging on regulatory evaluation and gains commitments to address the backlog, 2025 https://rpc.blog.gov.uk/2025/04/24/rpcpublishes-league-table-of-departmentslagging-on-regulatory-evaluation-and-gainscommitments-to-address-the-backlog/ 70 Regulatory Policy Committee Blog, Postimplementation reviews: Update on progress across government, 2025 https://rpc.blog.gov. uk/2025/12/01/post-implementation-reviewsupdate-on-progress-across-government/ 71 Home Office and Department for Business and Trade, Reforming the licensing system https:// www.gov.uk/government/calls-for-evidence/ reforming-the-licensing-system 72 FSB report, Escaping the Maze, How small businesses can thrive under the British Columbia regulatory model, 2022 https://www.fsb.org.uk/resources/ policy-reports/escaping-the-mazeMCL2TPHYSTYJGLBBY3ZY7RLDIMJU 73 FSB press release, “Government must build on lessons learned from New Deal for Business”, April 2025 https://www.fsb.org.uk/media-centre/ press-release/government-must-build-onlessons-learned-from-new-deal-for-businessMCTA2YXUESVZFD3H3ZQKV72JZ5NY

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