The survey of more than 7,000 business owners worldwide in 30 countries found that red tape is hindering more businesses in Europe than the rest of the world; with Poland (56%), Russia (54%), Greece (53%), Germany (52%) and The Netherlands (50%) occupying the top five places in the survey.

Bureaucracy appears to be decreasing in Russia despite the fact that it occupies second position in the survey, with 4% fewer businesses claiming it as a business constraint than in the previous year. In contrast, both Italy and Turkey have moved sharply up the table in 2006.

Red tape is less of an issue in East Asia and North America according to the survey.

“Medium-sized businesses are suffering around the world from red tape – it is the disease of modern business," observed Andrew Kinast, International Practice Partner, Grant Thornton Poland.

"Europe should be particularly worried, however, about the level of red tape it is facing in comparison with other geographic areas such as Asia. In particular Polish businessmen state that bureaucracy is their number one barrier to expansion. Our experience shows that rather than getting better the EU is making the problem worse," he added.

Lack of a skilled workforce is now the second most significant constraint to business after red tape, according to the survey. The main exceptions are Botswana, Australia and Thailand where more than half the respondents cite lack of a skilled workforce as the main constraint on business expansion.

Further findings from IBOS 2006 show that payment periods vary significantly among the 30 countries in the survey, with Russia being the fastest payer of invoices at 26 days, followed by Mainland China, Germany and Poland. The slowest payers are Greece, Italy and Spain, with Greece experiencing a steady lengthening in average payment periods in recent years from 68 days in 2003 to 84 days in 2006.

The 2006 survey also found that there has been a substantial increase in profit margin pressure experienced by a balance of 47% of respondents, with pressure the greatest in Taiwan (81%), Germany (74%), the UK (64%) and Thailand (60%). The main driver on profit margin was from customers to keep prices down.

Soaring oil prices and the third year of rising commodity prices was reflected in the survey with just under half of respondents identifying increased cost of fuel and raw materials as a major cause of profit margin pressure. To improve profitability, the survey found 87% of businesses are most likely to target cost reductions and 81% to opt for improving cash management.