Pubs and other small businesses are having to spend an average of 41 hours a week dealing with red tape, according to a new survey.
The Forum of Private Business (FPB) revealed that red tape is crippling the service industry in the recession.
It said that those with nine or less employees spend and average of 37 hours complying with legislation, which jumps to 53 hours for those with over 10 employees.
The FPB said the cost of complying with health and safety legislation alone cost smaller firms £832m. The cost of complying with employment legislation was put at £1,104m per year.
"Our research shows that complying with red tape remains one of the major cost burdens facing smaller businesses, swallowing up valuable time and money that could be used more profitably elsewhere," said Matt Goodman of the FPB.
"In addition, at a time when protecting both workers and businesses should be a priority, regulations are increasingly burdensome as businesses take on more staff."
The FPB recently met with the Better Regulation Executive to discuss plans to save UK industry £3bn a year by reducing red tape.