Red Tape and turd-gilding.
The problem for small-business comes when the rules for big-business get applied.
Responding to a tender document, even a one-man business is these days invariably asked to confirm that they have in place a range of auditable environmental/anti-discrimination/fair-trade/fair-pay policies, questions on whether you offer flexible-working/workplace-nursery/stakeholder-pensions to your 'employees' etc. If you don't, you don't get the tick-in-the-box on the assessment - so you don't get the contract.
Then there's all the EU-mandated stuff like WEEE directives - all this adds small but cumulative amounts of friction and drag to the whole process-of-commerce.
Public-sector organisations are the worst for this sort of legislational turd-gilding. Charities and other 'third sector' bodies are close behind. Some private businesses are standing fast against this regulatory touchy-feely stuff, but their numbers are falling.
What's needed is for small-businesses to be granted an exemption from all this legislation that's only really applicable to big corporates.