Commercial disputes are costing small firms in England and Wales as much as £11.6 billion every year, according to new research from the Federation of Small Businesses (FSB).
Nearly three quarters (72%) of small business legal disputes are down to late or non-payment.
FSB’s latest report reveals that 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.
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.
FSB also reveals that nearly a fifth (19%) of firms took their most recent dispute to court. Less than one in ten (8%) used alternative dispute resolution, such as mediation or an arbitrator to try to resolve their dispute. Half a million businesses (17%) were apparently left with their most recent dispute unresolved.
“Disputes are inevitable in business, but many small firms don’t have the time or resources to deal with them effectively,” said FSB National Chairman Mike Cherry.
“We want to see a beefed up system to bring about fewer disputes and faster resolutions for small firms,” he added. “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.”
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