Business for Scotland recently submitted a response to the UK Government regarding the set up and structure of the Small Business Commissioner (SBC).
What is it?
The Small Business Commissioner is a role that has been successfully pioneered in Australia that offers dispute solving support to small businesses, predominately payment disputes with larger businesses. This is an important role as large businesses often disadvantage the smaller supplier by holding onto payment way beyond agreed terms and this causes slower growth in the small business sector. Small to medium sized enterprises (SME’s) make up 99% of Scotland’s registered companies and earlier this year Business for Scotland conducted a survey of over 300 of our SME members and found some 67 per cent claimed that if late payment wasn’t a problem, then their business would grow faster.
When considering the introduction of a Small Business Commissioner, the Westminster Government should adopt a vital element that is key to the success of the Australian system, with multiple Small Business Commissioners based across the country. A single Commissioner with an office based in London will have little time nor ability to understand the unique circumstances and nature of the Scottish economy. To do the job properly all the nations of the UK and major English regions require their own devolved Small Business Commissioner (SBC).
The main functions of the proposed SBC can be summarised into three sections;
- Giving information and general advice to small businesses. This could be in terms of contract principles or presenting options on how to solve a dispute.
- To direct small businesses in the appropriate direction for services that can facilitate their work. For example, to ombudsmen, regulators or other services that can aid in solving the dispute.
- To act as a professional platform for small businesses to receive useful information from as well as support and advice. For instance, the Commissioner will receive complaints from small businesses about their clients paying their invoices late. In 2015, the cost to SMEs of overdue payments was £26.8 billion. The Commissioner would be a vital service that should be introduced to all nations of the UK.
The current plans are for the proposed SBC to based in London, Business for Scotland puts forward suggestions on how and why this should be changed.
Chasing late payments can cost small firms thousands per month
The primary aim for Business for Scotland in submitting a response to the UK Government concerning the role of the SBC is to set up a fair Commissioner system which would equally benefit small companies across the UK. The UK Government should build a strong and sustainable support system for small businesses so that they are protected against bigger businesses that have a significantly larger financial resources and a track record on late payments. In Scotland, this appears to be worse than for the UK as a whole as many Scottish firms are at the smaller end of the size scale and have even less influence with the larger companies that they supply.
Suggested changes by Business for Scotland
Although Business for Scotland has suggested various alterations in its response form (See link – Business for Scotland Consultation SBC 2016), the main points that Business for Scotland believe need to change are;
- That the Commissioner role should be highly devolved and not only have an office in London. Instead, offices should be set up in Scotland, Wales and Northern Ireland in addition to London. Ideally, offices should also be set up in different regions in England – East Midlands, North West, South West etc. A London based office is likely to prioritise complaints differently to a Welsh, Scottish, Northern Irish or North West English Commissioner. Therefore having highly devolved Commissioner offices is vital to ensure unbiased decision making. This has been accomplished in Australia which has different Commissioners across the country representing the various regions – Western Australia, South Australia, New South Wales and Victoria.
- The devolved SBC’s in the nations of the UK can be fully autonomous or report to the UK SBC dependent on the wishes of the devolved legislator, eg. the Scottish Parliament. English regions should report to SBC, whilst SBC in devolved nations should only be required to collaborate with UK’s Business Commissioner.
- The time limit for a late payments should be 3 months.This is to avoid larger companies taking advantage of small businesses by dragging out the negotiations until the small company is unable to finance itself.
- Late payments should be prioritised. Complaints, other than late payments, should be dealt with on a ‘first come first served basis’. Small businesses may be experiencing cashflow crisis when they complain about late payments, hence such complaints should be acknowledged and responded to as a priority.
- The Commissioner’s determinations should be legally binding. If decisions are not binding large companies may use the SBC process to extend or defer payments. Large businesses may spend 6 months in mediation and then not pay. This would be considered wasteful for both small businesses and the SBC. In addition, if decisions are not legally binding it would also discourage small businesses to file a complaint to the SBC.
Conclusion
There are a number of positive benefits with the current suggested Small Business Commissioner structure. Nevertheless, to enhance the support to small businesses across the whole of the UK and particularly in Scotland, Business for Scotland recommends that the Commissioner roles should be devolved across the UK. This would mean having fully autonomous SBC’s in each UK nation, that there should be a time limit placed on late payments, late payments should be prioritised and the Commissioner’s determinations legally binding.
The UK Government will publish its response to evidence submitted between December 2016 – March 2017.
