Global cost of regulation put at $1.2 trillion

Worldwide costs of complying with government regulations have soared to nearly $1.2 trillion annually, with roughly half the pain falling to U.S. businesses, a new study has concluded.

Published Thursday by the international law firm Berwin Leighton Paisner, the “Speed of Business” report is based on a survey of 250 international businesses covering a wide swath of industries, including finance, healthcare and energy.

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“It is apparent from our study that some businesses are becoming entangled in a bureaucratic web preventing them from doing what they do best — creating, innovating and growing,” said Neville Eisenberg, managing partner at Berwin Leighton Paisner.

The online survey, conducted in August and September, found that about 6.2 percent of costs incurred by transnational companies stem from regulatory compliance. The U.S. companies spend the most on compliance — roughly $557 billion — while firms in Europe spend $309 billion and Asian outfits shell out around $311 billion, according to the report.

However, the three regions rank in reverse order in terms of perceptions that regulation serves as a barrier to innovation, the report found.

More than 58 percent of the European firms surveyed hold that view, while 43.2 percent of Asian companies said rules hinder innovation, and 40.2 percent of U.S. companies agreed.

The study concluded that regulations impact firms differently, with those able to remain on top of regulatory responsibilities able to reap rewards in the forms of customer confidence, forestalled litigation and clear operating standards.

“For some it is difficult to overcome the cost of compliance which may hinder their progress,” Eisenberg said. “Other companies, often those which benefit from enlightened leadership, are able to navigate through these complex issues and experience the positive benefits.”