New Data Protection Laws Could Hinder SMEs

FSB And BBA Believe New Data Protection Law Proposals Could Cost SMEs £75,000 A Year


Newly-proposed data protection laws could cost British small and medium enterprises (SMEs) up to £75,000 a year, it has been claimed.

EU leaders are set to discuss the potential reforms with Home Affairs ministers on 6 December and the Federation of Small Businesses (FSB) and British Bankers' Association (BBA) believe they could place unnecessary strain on companies.

If they are implemented, the regulations would force small businesses that hold more than 5,000 people's details to employ a data protection officer, conduct an impact assessment and carry out a compliance audit every two years.

Data security has become a more pressing issue, with the number of firms being targeted by hackers growing each year.

While data protection laws can help to ensure sensitive information is safeguarded, many British enterprises feel they are already too burdensome.

Companies that fail to abide by the Data Protection Act 1998 face hefty fines from the Information Commissioner's Office.

According to the FSB, one in five SMEs cite data protection compliance as their biggest challenge and this new legislation could make matters even worse.

The organisation stated that a data protection officer will command an annual salary of £64,000, while initial assessments will cost firms in the region of £11,200. Many small businesses cannot afford this added expense.

John Allan, national chairman of the FSB, suggested the proposed reforms could stifle economic growth in the long run.

"If you are a small business with 4,500 customers on your mailing list you might reconsider plans to grow your business for fear of having to spend over £75,000 each year in order to comply with data protection regulations," he commented.

"We urge European leaders not to press forward with this law in its current form as small businesses would clearly suffer."

Irene Graham, managing director of business finance at the BBA, added the legislation could place "real burdens" on SMEs all over Europe.

Expert Opinion
Data protection is a hugely important issue for all businesses, but it is equally important that the small business community are able to voice any concerns they do have other proposed changes to ensure that regulation remains fair and proportionate.

“Running a growing business is a hugely difficult process and while operating a company in the right manner is of course vital, it is also important that the ability of companies to grow and develop is not in any way stifled by too much of a burden of red tape.

“Small and medium-sized businesses have a huge role to play in helping the economy continue to grow but they need support in able to do meet their ambitions. On the flipside, we would also urge growing firms to ensure they have access to quality legal advice and other support regarding regulatory issues including data protection.”

Fergal Dowling, Partner