Small enterprises need better support in handling disputes, says the Federation of Small Businesses

By Lee Dixon In Legal News

The Federation of Small Businesses (FSB) has outlined a number concerns relating to the way the legal system supports and handles disputes concerning small and medium-sized enterprises (SMEs).

According to the FSB, small businesses are in need of a “beefed up” legal system in order to help tackle lengthy and costly commercial disputes. The organisation, which offers advice, support, financial expertise and a voice in government to the UK’s small business community, presented the findings of their latest piece of research in December and challenged the legal system to become more robust in the way it handles disputes.

Tied up: unravelling the dispute resolution process for small firms found that fewer than 1 in 10 of its members (accounting for 99% of private sector businesses) currently sought alternative dispute resolution in disputes. More than 40% chose informal or semi-formal resolution – such as seeking the help of an advisor.

However, over half of the FSB’s membership felt that the only form of dispute resolution open to them was formal resolution through the civil courts. Just under 80% of those who opted for formal dispute resolution admitted to handling their case through the small claims court.

According to the FSB’s study, more than 3.4 million businesses have been involved in one or more commercial dispute between 2010 and 2015. These cases are estimated to have been worth an average of £18,000 – commonly relating to late payments or non-payment.

The reason for so many cases progressing to court, the FSB says, is a “knowledge gap” among both businesses and their advisors, and fragmentation among suppliers of alternative dispute resolution.

As a result of their research, the FSB has laid out a number of suggested measures to help ensure that “a significant improvement in the dispute resolution landscape for small businesses” can be “developed holistically”. The FSB also asserted that the development of online court systems should be integrated “seamlessly” with other courts and forms of dispute resolution, facilitating what they have described as a “frictionless” shift of cases between systems.

The FSB’s report highlighted the significance of the government’s plans to invest in IT and court infrastructure, although it noted that the requirement for reforms in the management, funding, access and organisation of existing court systems was particularly urgent.

Another initiative supported by the FSB was the introduction of an online hub to provide guidance and support for SMEs to help them prevent or resolve disputes quickly, rather than allow them to fall into costly and protracted legal proceedings.

As Mike Cherry, national chairman of the FSB, said:

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.”

He continued:

We support a vibrant and diverse legal services market to meet the needs of small businesses. Legal businesses can be a key part of this.”

Want to do more for your small business clients? Looking to offer a transparent and cost-effective service for enterprises in commercial disputes? Register with The Law Superstore today and let us bring pre-qualified leads directly to you.

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