By Kate Holton and Sarah Young
HEDDINGTON, England, Feb 14 (Reuters) - For Peggy Robinson, the directives coming from the European Union are now so relentless she hires an extra person just to "wade" through the paperwork at her small family firm.
Gareth Jenkins, a small manufacturer from Wales, relies heavily on his lawyer to understand the many rules, and describes the experience as a snowstorm of new legislation coming from every direction.
Both are typical of many small businesses around Britain who benefit hugely from free trade but feel they are buckling under the weight of regulation and are starting to wonder whether life might be easier if the UK withdrew to Europe's sidelines.
The debate has taken on added meaning since Prime Minister David Cameron said last month he would seek to cut red tape in a renegotiation of the terms of Britain's EU membership, before holding a straight in-out referendum by the end of 2017.
"They're telling us how to run our companies, and that grates," says Robinson, who handles the paperwork for her family's 25-person manufacturing business from a farm in Heddington, in southern England. "Our cultures and practices are different, yet our hands are bound."
The issues that concern the companies include health and safety regulations, changes to pensions, and requirements for maternity and paternity leave. Cameron said "Europe had gone too far" in setting "unnecessary rules and regulations".
Much of the response from business so far has come from the heads of the country's largest companies, such as WPP's Martin Sorrell and Virgin Group's Richard Branson, who believe a five-year wait for a referendum will create uncertainty and stifle investment in the $2.5 trillion economy.
But the opinions of smaller companies, which with staff numbers of between 20 and 100 lack the manpower to handle "red tape", are more nuanced.
"We all like free trade. We all recognise the euro zone as our main trading partner," said Jenkins, managing director of FSG Tool & Die in south Wales. "But the things we don't like as a community are the raft upon raft of legislation. It's like being in a snowstorm. There are so many flakes you can't count them."
The Federation of Small Businesses says EU regulation falls disproportionately on small firms.
Vic Haines Transport is a father-and-son haulier based in the Midlands that started in 1970 and delivers goods around Britain, including imported items and goods for export. They have had to adapt since the financial crisis hit in 2008 to avoid the fate of rivals who have fallen by the way side.
"Europe for us is really just a pain in the arse," Vic Haines said in his small office on an industrial park, surrounded by photos of lorries, rugby teams and grandchildren.
He complains that Britain observes the rules more closely than other countries in Europe.
"We are stuffed up with all these rules and regulations, and we're the only ones doing it. You go to France and they don't know what a health and safety executive is."
The trade body that represents the country's manufacturers acknowledges that a large part of the problem in Britain is the way the government interprets the rules.
"Other countries in Europe often find ways to introduce legislation that is less burdensome," said Steve Radley, the director of policy for the EEF manufacturing group.
But he also cautions that "Brussels" has become a catch-all word for any regulation that is seen as unnecessary, regardless of whether it stemmed from the EU or Westminster.
PILES OF PAPER
In Robinson's office, numerous EU directives are stacked among the piles of paperwork.
"We have EU directives where the draft started out at five pages long and it was well intentioned," she said while scrolling through a website that churns out the latest rules.
"But once it's gone through 25 countries, it's at 25 pages. It's been diluted, and it's meaningless. It's paperwork for paperwork's sake, but we have to keep on top of it."
Cameron wants Britain to stay in a reformed EU, and on balance the small businesses that spoke to Reuters agree. A survey by the British Chambers of Commerce conducted last year showed that 47 percent of firms want a looser relationship with the EU, while only 12 percent want to leave.
"Nobody wants to lightly walk away from a market of 500 million consumers," said the London Chamber of Commerce's policy director Sean McKee. "That would be madness."
The directors who spoke to Reuters said they hoped Cameron could use the looming referendum to improve the terms of their EU membership, and they hope it will spark a proper debate in a country where Brussels is often depicted as a faceless bureaucracy intent on imposing petty regulations.
"If there was no free trade, we would be uncompetitive," Jenkins of south Wales said. "That's the nightmare scenario. Every business person I talk to would like to be in the EU but throttle back on some of the legislation."
Others are concerned that even though they are conscious of the burden of regulation, they believe it is a price worth paying and see the referendum as a huge gamble.
Several said the single market had made trading much easier in terms of the paperwork needed to move goods and people around the region, and warned that it was more complicated to export to non-EU countries.
"It gives us fewer barriers for trading, there's less bureaucracy when it comes to crossing borders, and there's less documents required," said Dominic Yeardley of the European Road Freight group in Hull, northern England.
At the other end of the country, Alun Morgan, the Technical director at Arcol Resistors in Cornwall, agrees.
"I don't know how onerous paperwork would be were we to step back from Europe, but I'm certainly sure they wouldn't make it any easier, would they?"