New research reveals ‘significant and detrimental’ impact of commercial disputes on SMEs

96% of small and medium sized businesses in the UK regularly experience commercial disputes, according to new research released today by dispute resolution specialist, Escalate.

The research also reveals that commercial disputes have a significant and detrimental impact on the business community, with over 42% of respondents stating that such issues put their business’ future at risk, and a similar number reporting that they are forced to delay investment in their companies as a result of disputes.

Despite these persistent and serious issues, only 23% of respondents have taken legal action to try to resolve their commercial disputes.  The most frequent reasons given for not pursuing legal action were the cost, time, fear and hassle of the process, as well as concerns about losing the other party’s business.

Non-payment of invoices is the most common type of disputes affecting SMEs, with 57% of respondents having experienced at least one instance in the past 12 months. Breaches of contract are another serious issue, with 21% of smaller businesses reporting one or more cases recently. 12% of respondents experienced an employment-related issue.

Escalate is a dispute resolution specialist with a unique, multi-award-winning process that helps businesses to achieve a prompt settlement to a wide range of commercial disputes, with fixed fees payable only on a successful outcome and no upfront costs. It is already helping businesses across the UK to recover more than £50 million that is currently locked up in commercial disputes.

Highlighting the real impact of commercial disputes

The research was conducted together with Escalate’s network of over 20 accountancy and legal partner firms, which collectively have access to a client base of hundreds of thousands of SMEs across the UK.

Chris Clay, Managing Director of Escalate, said: “This report highlights the true impact of commercial disputes on SMEs across the UK. Although the Government has recently started some initiatives to tackle some of the underlying issues, the results make it clear that the current system remains broken. 

“In our view, successfully tackling the problem requires a cultural shift by large businesses and a renewed focus on this area by the Government and regulators. Only when attitudes at the leadership level begin to change will behaviours shift.

“However, it is unlikely to be enough by itself. Ensuring that SMEs have quicker and more cost-effective access to the legal system will be vital if all of the promising work done so far is to have real bite. Accountants and lawyers have an important role to play here.

“While there has undoubtedly been progress in the area of commercial disputes, the results of this survey make it clear that there is considerable work still to be done. All of the Escalate partner firms are committed to playing their role in resolving the issue.”