Perceptions and Experience of Employment Regulation in UK Small Firms

Abstract

The view that excessive regulation constrains small business growth has been a persistent theme within business and policy communities, although recent studies have demonstrated the actual effects of regulation to be relatively modest. A prior small-scale study proposed four reasons why employment legislation does “not damage” small firms. We attempt to assess the robustness of these propositions in a large-scale survey of 16 779 small firms. Results provide empirical support for three propositions. Firstly, perceived dissatisfaction masks actual effects. Secondly, competitive conditions mediate regulatory effects; however, even resource-constrained firms reported few negative effects. Thirdly, informality eases regulatory impact. Results failed to confirm that older laws are ‘routinised’. Length of time as a business owner was found to be more influential than age of regulation, with owners who have been in business for many years having a longer ‘window of exposure’ increasing their likelihood of experiencing negative and positive effects.