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Deciding not to employ new members of staff because of the costs and risks involved can hinder business expansion and significantly obstruct new company formation, according to new research.
The decision to hire new members of staff is one of the most important decisions a company director of an SME will make, but many often decide against this because of the associated red tape.
And according to Startup Co, this can have a detrimental effect on business growth and further expansion.
A report published in October 2007 by the Federation of Small Businesses found that of the 35 per cent of businesses in the UK without employees, 36 per cent did not employ anyone because of the business risk, while 31 per cent cited the burden of red tape and legislation as a main cause.
John De Groot, chief executive of Startup Co, said: "A lot of small businesses decide not to take on employees because of the potential red tape and difficulties they will incur.
"As a result, they do not grow the business. It is not only a deterrent for the individual; it is also a deterrent for the economy."
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