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Monday, July 12, 1999 Published at 12:56 GMT 13:56 UK

Business: The Company File

The cost of red tape

Institute of Directors: calling for burdens on business to be reduced

The Institute of Directors says red tape introduced in the past two years is costing British business almost 5bn a year and that new rights for employees are placing an "astonishing burden" on industry.

A report by the IoD has estimated that the European directive introducing a maximum working week of 48 hours will cost businesses 2.3bn a year, while the national minimum wage will add another 2.4bn.

Overwhelming bureaucracy

The report also says the Working Time Regulations are a major impediment to flexible working, and the minimum wage rules are so complex that the guidance book for employers is 112 pages long.

The IoD says new unfair-dismissal rules, parental leave regulations and the working families tax credit will impose further burdens.

The report's author, Richard Baron, said: "Businessmen and women work hard to create jobs and wealth for the nation. They must be allowed to focus on business decisions not distracted by red tape."

The head of the IoD's policy unit, Ruth Lea, said: "It is our view that employees' rights have gone right over the top. This country has to decide whether it wants an efficient business sector or not."

Going bust

The IoD has also published an economic outlook for the UK which predicts that the number of corporate insolvencies is set to rise by 16% in 1999 and a further 6% in 2000.

But it says stronger growth in 2000 will see insolvencies dropping back by 16% in 2001.

The IoD's chief economist, Graeme Leach, said: "The financial position of the corporate sector deteriorated in early 1999 for two reasons.

"Firstly, because of the maintenance of investment against a background of insufficient internal funds. Secondly, the maintenance of employment - labour hoarding - against a background of insufficient sales."

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