Businesses are spending on average £60,000 more on Government interventions compared to 2011, a new study has revealed.

The research, published by the Federation of Small Businesses (FSB), found that the average UK small business is spending 15 per cent more on taxes, levies and employment obligations compared to eight years ago.

The Government Policy Index (GPI) analyses a number of policy-linked obligations, such as business rates, auto-enrolment and insurance premium tax.

According to the data, the average VAT-registered UK small business now spends more than £480,000 each year on these interventions, up from £420,000 in 2011.

Employment costs, for example, have jumped by 29 per cent due to the rapidly increasing National Minimum Wage (NMW) and the introduction of the employer and employee contribution-based automatic enrolment scheme.

Rising costs of doing business may have also attributed to the UK’s downgraded ranking in the world’s best places to run a company, dropping from fourth in 2011 to ninth this year.

Despite the alarming figures, the FSB said small firms are still set to see costs “spiral as a result of Government policies” in the months ahead.

“Come the beginning of April, small firms will not only have Brexit day to worry about but also Making Tax Digital, a higher living wage, rising employer auto-enrolment contributions and further business rates hikes. This will be a flashpoint for a lot of businesses, one which could threaten the futures of many,” said FSB National Chairman Mike Cherry.

“Small employers have played a massive role in securing record-high levels of employment. Maintaining these levels means providing more support for the small and mid-sized firms that are hit especially hard by policy-linked costs – particularly where staff are concerned.”

He added: “Mitigating spiralling employment costs through further enhancement of the Employment Allowance while reforming outdated aspects of the tax regime – not least business rates – would be a good place to start.”

The report follows recent research which revealed that small firms each lose on average £5,000, or three working weeks a year, to tax administration and paperwork alone.

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