Red tape biggest constraint globally to business expansion

Red tape

Regulation and red tape is the most significant constraint to business expansion globally in 2006 according to the latest findings from the Grant Thornton International Business Owners Survey (IBOS). The survey of more than 7,000 business owners worldwide in 30 countries found that red tape is hindering more businesses in Europe than the rest of the world; with Poland (56%), Russia (54%), Greece (53%), Germany (52%) and The Netherlands (50%) occupying the top five places in the survey.

Although Russia takes second place in the ranking, its bureaucracy appears to be decreasing with 4% fewer businesses claiming it a business constraint than in the previous year. In contrast, both Italy and Turkey have moved sharply up the table in 2006. Red tape is less of an issue in East Asia and North America according to the survey.

Lack of a skilled workforce is now the second most significant constraint to business after red tape; although the global level is similar to that seen four years ago despite strong economic growth. The main exceptions are Botswana, Australia and Thailand where more than half the respondents cite lack of a skilled workforce as the main constraint on business expansion.

Andrew Kinast, International Practice Partner, Grant Thornton Poland said: "Medium-sized businesses are suffering around the world from red tape - it is the disease of modern business. Europe should be particularly worried, however, about the level of red tape it is facing in comparison with other geographic areas such as Asia. In particular Polish businessmen state that bureaucracy is their number one barrier to expansion. Our experience shows that rather than getting better the EU is making the problem worse."

He continued: "As the world economy slows, I expect to see a loosening of the pressures caused through a lack of skilled workforce in the West, but I expect it to continue to rise in emerging markets such as India."

Late payments

Further findings from IBOS 2006 show that payment periods vary significantly among the 30 countries in the survey with Russia being the fastest payer of invoices at 26 days, followed by Mainland China, Germany and Poland. The slowest payers are Greece, Italy and Spain, with Greece experiencing a steady lengthening in average payment periods in recent years from 68 days in 2003 to 84 days in 2006. The average payment period worldwide has remained constant between 46-47 days since 2003 which masks divergent trends with improvement in France and Spain and significant deterioration in Greece, Singapore and Taiwan.

Profit margin pressure

The 2006 survey found that there has been substantial increase in profit margin pressure experienced by a balance of 47% of respondents, with pressure the greatest in Taiwan (81%), Germany (74%), the UK (64%) and Thailand (60%). There appears to be no geographic pattern to the findings and the geographies are economically diverse. The main driver on profit margin was from customers to keep prices down, particularly in Singapore, Botswana and Greece.

Soaring oil prices and the third year of rising commodity prices was reflected in the survey with just under half of respondents identifying increased cost of fuel and raw materials as a major cause of profit margin pressure. To improve profitability, the survey found 87% of businesses are most likely to target cost reductions and 81% to opt for improving cash management.

Ends

Notes to editors

The Grant Thornton International Business Owners Survey (IBOS) was carried out among more than 7,000 owners of medium-sized businesses from 30 countries during Q4 2005. IBOS began in 2002 and builds on the European Business Survey (EBS) which Grant Thornton International ran from 1993 to 2001. The research was conducted by Experian Business Strategies Limited and Harris Interactive. To find out more about IBOS and to obtain copies of IBOS supplements.

* The 'balance' is the difference between the proportion of businesses indicating optimism and those indicating pessimism, or between those indicating an increase and those indicating a decrease.

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Grant Thornton International is one of the world's leading organisations of independently owned and managed accounting and consulting firms providing assurance, tax and specialist advice to independent businesses and their owners. Grant Thornton International is a non-practicing international umbrella organisation and does not deliver services in its own name. Each member and correspondent firm in Grant Thornton International is a separate independent national firm.

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