BLOG: SMEs - Supporting the heart of Britain's economy

By Philip Gray on May 18, 09 04:17 PM

Philip Gray.jpg

LAST WEEK I went to a breakfast event in support of European SME (Small and Medium Size Enterprise) week, hosted by The Federation of Small Businesses and Liverpool John Moores University.

As part of the event, Liverpool City Council's executive member for enterprise and tourism, Gary Millar signed the FSB's "Small Business Engagement Accord", a voluntary code of practice designed to improve the level of participation between local businesses and the council.

It is a surprising fact that 98% of Britain's businesses are SMEs and employ 58% of the private workforce contributing 50% to the UK GDP.

SMEs are, therefore, not just the heart of Britain's economy but are the vital organs, limbs and lifeblood.

The importance of SMEs and the need to support them wherever possible is particularly relevant given the perilous current economic conditions, which adversely affect SMEs even more than multinationals.

Last week also saw an initial report into litigation costs published by Lord Justice Jackson and made for yet more depressing reading for those of us who work with and advise SMEs.

All businesses need to know that if contracts are not adhered to they will be enforced in the courts.

Despite this, the initial result of the report concluded what litigators already knew: our court system is simply not geared towards the needs of SMEs.

But there was even more depressing news hidden away in the detail of the 650-page report.

The World Bank, which regularly monitors the performance of all legal systems and how effectively they enforce contracts, ranks the UK in 24th position.

We are behind many European countries, including France and Germany and also below Australia and New Zealand, two states who effectively inherited our common law on contract.

At present there is no separate court system for SMEs. All business disputes go through the County Courts or divisions of the High Court.

There is, however, a modified procedure for cases valued at less than £15,000 (fast track claims), used in the County Courts, but most business disputes, even between SMEs, exceed this limit.

There have been some positive developments in litigation recently.

Alternative Dispute Resolution is being used more and more frequently to settle disputes out of court and the Pre-Action Protocols are being widely followed to ensure potential defendants have a chance to pay up before proceedings are issued.

Nevertheless, once in the court system progress to trial remains very slow.

In light of last week's initial report perhaps it is now time to separate SMEs in the legal system, with one type of court geared solely towards delivering SMEs affordable and swift judgments.

Alternatively, I would suggest that the limit for fast track claims should be raised from £15,000 to £30,000 - or even £50,000 - to enable more SMEs to have access to the courts.

Philip Gray
Kirwans