New research from the Federation of Small businesses (FSB) has revealed that up to £12.4bn could be tied up in commercial disputes at any given time, with an estimated cost of £11bn to resolve disputes in a typical year. The figure comes from a new report, ‘Tied Up: Unravelling the dispute resolution process for small firms’, which aims to report the scale of the problem and to suggest some remedies to what is a growing problem.
According to the research, most small businesses (70%) have faced at least one dispute in recent years. On average, the amount under dispute is £18,000. It can cost a small firm a further £17,000 when having to spend time and money dealing with the problem.
Further, only 19% of firms took their most recent dispute to court while less than one in 10 (8%) used alternative dispute resolution, such as mediation or an arbitrator to try to resolve their dispute. “And it’s deeply concerning,” the report says, “That half a million businesses (17%) were left with their most recent dispute unresolved.”
“Costly and complicated”
FSB National Chairman Mike Cherry said that while disputes are inevitable in business, “Many small firms don’t have the time or resources to deal with them effectively.
“The dispute resolution process faced by small businesses in England and Wales is costly and complicated. Billions of pounds are flowing out of small business pockets as they try to claw back unpaid debts.
“We want to see a beefed up system to bring about fewer disputes and faster resolutions for small firms,” Cherry said. “The Small Business Commissioner should become a hub for prevention and early intervention, dispute advice, and for helping small businesses identify and use alternative dispute resolution.”
The Federation has come up with some policy recommendations, the key ones being:
- The new Small Business Commissioner should develop an online hub, providing guidance and support for small businesses to help prevent disputes, or resolve disputes early
- Strengthening alternative dispute resolution (ADR), by reviewing its effectiveness for small businesses
- Overhauling the civil courts fees system and introducing a specialist commercial track in the lowest courts to make it cheaper, quicker and fairer for small firms