Does regulation stifle growth and innovation?November 26, 2013
What is the real cost to business of complying with regulation and what impact does it have on companies’ ability to innovate and grow?
A new report by Berwin Leighton Paisner, “The Speed of Business” attempts to quantify the cost of regulation across the world’s major economies and comes up with the staggering figure of $1.2 trillion annually. A significant proportion of those who contributed to the firm’s research said that they believe the overall cost of compliance to be between 5% and 10% of turnover, with some 15% believing it to be even higher.
This underlines the importance of regulation being considered at Board level as a significant factor in business performance and as a brake on growth and innovation. 73% of firms surveyed said that regulation directly affected their ability to grow and innovate, with many ranking it ahead of factors such as access to finance and trade tariffs.
The report also has some interesting insights into the part regulation plays in hampering access to growth markets. The US and China are consistently the two leading choices when it comes to breaking into new markets. Both were also perceived as having tough regulatory regimes, albeit for very different reasons, according to wider consultations: China because of a lack of transparency and regional complexities; the US because international firms felt they lacked the expertise to influence policy making in the way that US firms have become so adept.