NCPA - National Center for Policy Analysis

Regulatory Burden on Small Firms in Europe

April 26, 2002

The cost of regulation is a global problem affecting both developed and undeveloped countries. Despite the variety of approaches adopted to control regulatory costs, burdens seem to have grown everywhere.

  • The tax system has been estimated to account for 40 percent to 50 percent of the paperwork costs imposed on businesses, particularly for small and medium enterprises (SMEs).
  • In the early 1980s paperwork burdens on business large and small in the United Kingdom (U.K.) and Germany were estimated to be on the order of 2 percent to 4 percent of Gross Domestic Product (GDP) and certainly have increased since.
  • More recent estimates indicate a range of 3 percent to 4 percent in Europe for SMEs alone.
  • A recent survey by the Organization for Economic Cooperation and Development (OECD) provides estimates of regulatory costs, again only for paperwork and excluding large firms, in a range of 1.3 percent to 6.8 percent for seven European states, and between 1.8 percent and 3.7 percent for three non-European countries.
  • Federal regulatory costs in the U.S. are 7.7 percent of GDP.

Regulation is necessary and inevitable in a modern society, say observers, but like anything else, without real discipline, it can get out of hand and damage the interests of those it seeks to protect.

Source: Graham Bannock, "Controlling Regulation," Economic Affairs, June 2001, Institute of Economic Affairs.


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