NEARLY 60 per cent of small businesses in the North-East admit to either reducing the number of people they employ or avoid employing more people because of the increased burden of paperwork.

Even more concerning is that when firms make the decision to become employers, 43 per cent choose to restrict or reduce the numbers of staff they employ, according to a survey by Mentor, the advice service from NatWest.

However, 28 per cent of the respondents did not think that they spent too much time complying with government regulations.

On average, small businesses spend 2.3 hours a month dealing solely with employee-related paperwork, with a fifth of all businesses admitting to spending well over five hours on employee regulations.

Those firms operating in the hotel and catering sector spend an average of seven hours dealing with employee-related paperwork, compared with only 1.3 hours for those in wholesale.

Small businesses in the North-East spend an average 8.5 hours a month dealing with all government regulations and paperwork, although this almost doubles for those businesses with more than 11 employees.

They spend 26 hours a month on compliance related paperwork.

The research also shows that the higher the turnover of the business, the more time they spend on dealing with government regulations, as those respondents with a turnover of more than £500,000 spend at least 22.5 hours a month.

The transport sector reports the largest burden when it comes to regulatory paperwork.

An average business spends 29.1 hours a month, while 33 per cent admit to spending between 31 and 50 hours a month completing the necessary paperwork.

Taxation, however, is the biggest concern for Britain's small firms, with 29 per cent from the North-East saying that they spent the most time dealing with VAT and 23 per cent dealing with PAYE.