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08 December 2016

Billions tied up in small business disputes

Disputes are costing small firms in England and Wales at least £11.6 billion each year, according to new research from the Federation of Small Businesses (FSB). 

FSB’s latest report, ‘Tied Up: Unravelling the dispute resolution process for small firms’, reveals for the first time the scale of disputes in the economy and the costs spent chasing debts. Nearly three quarters (72%) of small business legal struggles are down to late or non-payment.

FSB National Chairman Mike Cherry, said: 

“Disputes are inevitable in business, but 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."

Most small businesses (70%) have faced at least one dispute in recent years [1]. 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.

The consequences of disputes can be devastating for small businesses, ranging from short-term cash-flow difficulties right through to insolvency. FSB is calling for a new approach to help small businesses prevent disputes from occurring in the first place and facilitate faster, fairer and cheaper resolution when they do.

Mike Cherry added: 

“We want to see a beefed up system to bring about fewer disputes and faster resolutions for small firms. 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.”

 See the full press release