University's Small Business Research Centre analyses small firms' disputes with banks for national review by UK Finance

Posted Friday 23 November 2018

Kingston University's Small Business Research Centre has provided an analysis of small firms' complaints with their banks for an independent review headed by Simon Walker CBE, former Director General of the Institute of Directors.

Commissioned by UK Finance, the body representing the country's banking and finance industry, the review investigated how alternative dispute resolution procedures outside the court system could be used to provide a fair and effective means of settling disagreements between banks and their small business customers.

Professor Robert Blackburn is director of Kingston University's Small Business Research Centre. The Small Business Research Centre's analysis, based on extensive quantitative and interview data, formed the evidence for a set of recommendations that included an enhanced role for the Financial Ombudsman Service. The key was to offer new routes for small and medium sized enterprises (SMEs) to challenge banks without going to court, director Professor Robert Blackburn explained.

"Our research shows that most complaints to banks from small firms are dealt with quickly within the banks' own systems. However, more complex cases take more time and can lead to disputes. We found many small businesses did not realise they could use the ombudsman when looking for alternatives to going to court. Improving this service in line with the review's recommendations will better serve these clients."

Professor Blackburn backed the review's calls to strengthen the infrastructure of the Financial Ombudsman Service to support SMEs. It recommended that a dedicated small firms division be created within the service to handle all eligible disputes, including those from small businesses and microenterprises.

Following its publication, Mr Walker said the report's recommendations would create a fairer environment for small businesses in dispute with their banks.

"In the aftermath of the Global Financial Crisis 10 years ago, banks faced enormous pressure to reduce their risk exposure. Yet SME customers too often bore the brunt of this pressure and were clearly mistreated," Mr Walker said. "Our review seeks to provide a new route to redress for SMEs. Under the current system, too often SMEs have felt like David against Goliath."

The findings were presented to a hearing of the House of Commons Treasury Select Committee SME Finance on 23 October. The next step will be for UK Finance to respond to the Review.