Sir Luke Johnson: Red tape is stifling job creation; Gold-plating regulations provides yet another reason for entrepreneurs to ask: “Why bother?”

April 16, 2013 4:46 pm

Red tape is stifling job creation

By Luke Johnson

Gold-plating regulations provides yet another reason for entrepreneurs to ask: “Why bother?”

In Westminster and in Washington alike, politicians constantly say they want to stimulate entrepreneurship and promote investment. But warm words count for nothing if actions on the ground do not match the positive rhetoric from Downing Street and the White House.

The only pub in the village near my house in rural Malvern went bust and shut down. As an adventure, I bought it, refurbished the premises and relaunched the business late last year. The idea was never to make a significant profit but to open an establishment that would suit the community and of which I could be proud. Trading there has been tough, partly because of the poor weather. But we are making progress, and the locals have been supportive.

The ones who have not been so encouraging are the bureaucrats, despite the challenges facing the region. This part of the country is not wealthy: there are dozens of closed pubs and almost no outsiders putting money into the region. Yet the only communication of any kind I have had from government since I started the business has been bills, especially from the various tax authorities: property, employee, corporation, value added tax, licensing and so on. Never so much as a “thank you” or “good luck”.Possibly worse than this barrage of aggressive demands have been the attentions of the health and safety busybodies. They visited our pub and insisted on expensive changes to the way we stored heating fuel. This alteration is costing many thousands and the result will look ugly. The previous arrangement had been adequate for many years but it seems now is their moment to pounce.

These public servants, funded by the taxpayer, have no concept of how much small businesses have to struggle just to stay alive in this economic climate. No doubt they will insist that they are “only applying the rules”. But do any such government employees care about the damage their seemingly arbitrary rulings have on those who are brave enough to take risks, start businesses and create jobs? I have my doubts. Meanwhile, gold-plating regulations means ever greater costs for business, and yet another reason for entrepreneurs to ask: “Why bother?”

For similar reasons, I bought a shuttered restaurant in a resort called Cocoa Beach in Florida. Citizens in the town are hugely keen for this well-known and distinctive establishment to open again. It may become part of a downtown renovation: the district has experienced almost no new construction for decades. Again, the only official correspondence I’ve had from local government has been swingeing tax bills and, most recently, a demand that I expensively tear down the “rusting” sign atop my restaurant within a week, or face severe consequences – even though it has been up for decades.

I live thousands of miles from the US. I had been thinking this project would be fun. It needs substantial funding, but I was in principle willing to proceed. Now I am not so sure. I fear that almost whatever political leaders say, the attitude among the bureaucrats who actually control issues such as planning, licensing and health and safety will be destructive. Little do they realise how dispiriting their impact can be.

The first contact received by any entrepreneur who starts a new business or buys an existing one should be a letter of congratulation from the state. The governor, mayor and whoever else matters should applaud them for taking the plunge and possibly risking everything by choosing that town to back. Civil servants do not realise that it takes a near miracle for almost any new business to succeed. Yet government treats all private corporations as milch cows, dumb organisations that stand around waiting to be exploited for the state.

Many communities in Britain and the US suffer terrible unemployment and a chronic lack of investment. They desperately need more business.

Expansive generalisations from political bosses are not enough to persuade people to invest: there must be undertakings to keep the red tape at bay; to oblige the tax authorities to tread lightly; and to nurture every small business with practical exemptions from regulation and state extractions. Otherwise, frontline entrepreneurs like me will just take their money elsewhere.

lukej@riskcapitalpartners.co.uk

The writer runs Risk Capital Partners, a private equity firm, and is chairman of StartUp Britain

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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