New regulations set companies in the West Midlands back by an extra £71.2 million last year despite promises of a government purge on red tape.
Compliance with new regulations, including the flexible working practices, will cost the 99,000 small and medium-sized employers in the region an extra £725 per company next year, new research suggests.
This takes the estimated cost of compliance for employers in the West Midlands up to £1.6 billion, equivalent to £16,000 per firm, according to the Forum of Private Business.
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Its researchers found that manufacturing and commercial services firms are being hit hardest.
The forum’s chief executive Phil Orford MBE said: “SMEs continue to struggle to control costs and remain frustrated by the amount of red tape they have to negotiate every day.
“Understanding what is required to be compliant is a big issue for this sector and companies need to be kept up to date with major legislative changes.
“The increasing cost of fines for non-compliance on everything from health and safety to unfair dismissal has made the ongoing support we provide to our members through our helpline and guides all the more important.
“We keep our members regularly updated to ensure that they are aware of what legislation they need to know about and what regulations, such as the 2013 Defamation Act, are unlikely to have a great impact.”
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Retailers were least affected by the changes, with an increase of £445 on the cost of compliance, whereas manufacturers saw an increase of almost £1,044.
The amount spent on external providers was, however, even more pronounced with retailers spending £155 more on external support, far lower than manufacturers (£645) and those in health, social and care sectors (£622).
Overall 54 per cent of the cost of compliance was down to an increase in money spent externally, a direct cost to the business.
Much of this is down to payroll costs, like flexible working, real time information and preparation for auto enrolment, and the FPB says a large proportion of the compliance costs incurred by businesses are likely to continue for the “foreseeable future”.
In terms of the other industry sectors, construction firms have seen the cost of compliance rise by £814, including £475 on external consultants, and the service sector saw a general increase of around £730, including £394 on external consultants.
In total 77 per cent of the additional cost in compliance over the last 12 months will reoccur over the year after, researchers state.
Mr Orford added: “It is vital that regulators communicate major changes to compliance effectively – even improvements to regulations add cost to the bottom line of good, compliant businesses as they make the changes.
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“The problem with a lot of the regulatory environment is that businesses are not able to take advantage of deregulatory changes because the time to make the assessment and trust in enforcement agencies is simply not there.”
Prime Minister David Cameron pledged that thousands of rules affecting business are to be scrapped or amended earlier this year.
More than 3,000 rules will be dropped or changed, saving more than £850 million a year, he claimed, including 640 pages of cattle movement guidance, 286 pages of hedgerow regulations and 380 pages of waste management rules.