Commercial Financial Dispute Resolution Platform — House of Commons, 2016-12-15
Topic: Domestic Commerce
Philip John Boswell (Scottish National Party, Centre-left): I thank my hon. Friend the Member for East Lothian (George Kerevan) for securing this important debate. As others have rightly pointed out, those most negatively affected by the absence of a financial dispute resolution platform are largely small and medium-sized enterprises. The importance of such businesses to our general economic wellbeing cannot be emphasised enough. Some 67% of all UK workers are employed by small and medium-sized enterprises, which are not protected by the Financial Ombudsman Service. That figure amounts to 17 million employees, or over half the UK’s workforce. As such, it is important to recognise when discussing such businesses, which are at risk of going under owing to the burden of financial disputes, that it is not only the business owners who are at risk: the employees and their families will also feel the knock-on effects These vital small businesses face numerous structural challenges not faced by larger businesses. They have far fewer resources, meaning not only finances, but time, labour and information. In addition, they often have far less experience to draw upon than larger, more established businesses. The structural challenges mean that there is a substantial imbalance when SMEs get into financial disputes with large businesses or large banking institutions. The larger party involved in such disputes is inherently at an advantage, both in the context of a dispute resolution outwith the legal system and within the court system For small businesses that come into dispute with a financial institution, the first step is to submit a complaint to the institution’s internal complaint procedure, but many SMEs are fearful of even taking that first step. Unfortunately, it is unsurprising that SMEs feel sufficiently intimidated by financial institutions not to submit a complaint when they feel unfairly treated. According to statistics from the Bank of England, total lending from UK banks to other banks has more than quadrupled since 1990. However, lending from UK banks to businesses involved in production has remained stagnant. In addition, the Basel III international capital adequacy regulations, introduced in the wake of the financial crisis, have made lending to SMEs more expensive, further incentivising banks to lend to other banks, rather than to SMEs Just last week, I was approached by a small business from my constituency that has developed an innovative new technology that recycles waste and creates clean energy while minimising emissions. It reached out to me because it has struggled to obtain sufficient funding to move forward with the project, despite having built a test facility. That is just one example, but it demonstrates the degree to which small businesses struggle to obtain financing and credit. It is no wonder that many small businesses do not want to submit complaints to a financial institution. With so little credit available to SMEs, it is more than understandable that they want to protect their access to a limited available line of credit, even if it means being treated unfairly.