The international accounting and consulting firm's survey of more than 7,000 business owners in 30 countries found that red tape is hindering more businesses in Europe than elsewhere.

The top spot on the red-tape list went to Poland, where 56 per cent of respondents said bureaucracy was the main barrier to expansion, followed by Russia (54 per cent), Greece (53 per cent), Germany (52 per cent) and the Netherlands (50 per cent).

Although Russia took second place, red tape appears to be diminishing there, with 4 per cent fewer businesses claiming it is a constraint in the latest survey compared to the last one. In contrast, both Italy and Turkey have moved sharply up the table this year.

Red tape is less of an issue in Asia and North America, the survey found. Most Thai business owners did not identify red tape as an obstacle, with only 19 per cent of respondents saying it is a constraint to business expansion.

"Medium-sized businesses are suffering around the world from red tape - it is the disease of modern business," said Andrew Kinast, an international practice partner at 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," he warned. "In particular, Polish businessmen state that bureaucracy is their No 1 barrier to expansion. Our experience shows that rather than making things better, the EU is making the problem worse."

After red tape, the lack of a skilled workforce is the most significant constraint on business growth, although the global level is similar to that seen four years ago despite strong economic growth. In Thailand, Botswana and Australia more than half the respondents cite lack of a skilled workforce as the main constraint on business expansion.

 "Red tape is not such a problem in Thailand because most [small and medium-sized enterprises] have learned how to work around the government processes," said Peter Walker, partner of Grant Thornton Thailand.

"Instead, Thailand's worst business-performance issue is a lack of a skilled workforce. This can be addressed in many Thai companies through redirecting [human resources] efforts onto recruiting, retaining and training, rather than the current focus on enforcing restrictive employee control policies," he said.

"A lot of [human resources] departments in Thailand seem to position themselves as the corporate police department, instead of striving to create an environment where employees can excel and expand their capabilities," he said.

The length of time firms take to pay their bills varies significantly among the 30 countries surveyed. Russian firms are the fastest payers of invoices, at 26 days, followed by firms in China, Germany and Poland, the survey found.

The slowest payers are in 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 this year. The average payment period worldwide has remained at 46 to 47 days since 2003, masking divergent trends in particular countries. Firms in France and Spain are paying more quickly while those in Greece, Singapore and Taiwan are taking longer to pay.

On average Thai firms pay invoices in 44 days, the survey found.

It also found that there has been a substantial increase in pressure on profit margins. Globally, 47 per cent of respondents said their margins were being squeezed, with pressure the greatest in Taiwan (81 per cent), Germany (74 per cent), the United Kingdom (64 per cent) and Thailand (60 per cent). The survey found no apparent geographic pattern correlating to a tightening of profit margins.

Globally, the main pressure on profit margins was from customers trying to keep prices down, particularly in Singapore, Botswana and Greece.

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

In Thailand, respondents were in line with the global trend, saying they too were cutting costs and improving cash management to cope with rising oil and raw-material costs.

Thai respondents also cited rising domestic competition as a source of profit pressure, and a large number said they planned to increase their advertising and promotion efforts.

"These survey results indicate that, in the current environment, Thai businesses need to focus on three primary strategies," Walker said.

 "Keeping profits up by managing costs and cash, building their skilled resources through hiring and training, and increasing their presence in the market by effective marketing approaches."