It may sound cliched to some to suggest that small businesses are the backbone of the UK economy, but it is hard to argue against established statistics. SMEs make up 99.9% of all private sector companies in the UK, provide 59.3% of all private sector jobs and produce 48.1% of all private sector turnover. SMEs collectively employ 14.4 million workers and have a gross turnover of £ 1.6 trillion.
Despite their immense contribution to the British economy and society as a whole by driving growth and job development, SMEs continue to suffer from a lack of cost-effective ways to address their legal problems.
On average, small and medium-sized firms are facing a total of 8 legal problems each year with findings showing that companies with higher turnover, more employees and some in-house legal expertise have a greater need for legal services. Nonetheless, research indicates that a SME is as likely to ignore an problem or take non-legal advice as it is to take legal advice in response to a legal need, and it is twice as likely that no advice will be sought in either way. When small and medium-sized businesses seek legal counsel, just 30 percent of them want to work with a solicitor, with accountants, unions, HR consultants and barristers making up the rest of the external consultants.
A 2016 YouGov report shows that every year SMEs are losing £ 13.6 billion due to overlooked legal issues. Such damages are divided into various forms of legal disputes including Disputes (£ 1.7 billion), Workers and Contractors (£ 1.6 billion) and Consumers and Suppliers (£ 1.6 billion). In addition, 23% of SMEs report a substantial loss of income as a result of unaddressed legal issues, 12% report an increased expense, 9% report harm to their reputation and 6% report a shedding of employees and/or closure of the company.
These numbers represent a significant deficit of confidence between the SME business community and conventional law firms. The decision of small and medium-sized businesses to incur expenses rather than receiving legal services can be put down to the fact that only 8% of the companies interviewed found legal fees to be good value for money. However, just 1 in 5 SMEs classified law firms ‘good’ in terms of access. Respondents have shared an inability to understand complicated legal documents as a factor in their unwillingness to pursue legal counsel.
Old-fashioned hierarchical systems within the legal industry make lawyers hard to reach, time-consuming to engage and increasingly costly to deal with. Although companies recognise the need to invest more on their legal needs, a realistic alternative to the status quo is missing at present. Alternative Dispute Resolution provides an opportunity for small and medium-sized businesses to fill the void.
ADR approaches are focused on voluntary participation of parties to settle conflicts under the supervision and facilitation of a third party expert. Since litigation remains a costly and time-consuming process along with receiving uncontroversial legal advice from pricey law firms, ADR methods allow disputes to be resolved easily, at minimal cost and to both the parties’ satisfaction. ADR approaches such as mediation are commonly used in the commercial sector and boast an 85 per cent success rate. Such approaches that may be of interest to SMEs include:
• Negotiation–an informal way to settle a conflict, with our assistance including a back and forth between you and the other party before you reach a settlement. Click here to learn more.
• Mediation –requires an neutral third party initiating discussions between the parties with a view to achieving a mutually beneficial settlement. Click here to learn more.
• Arbitration–like a jury, except that it gives you confidentiality and a simple and binding verdict. In the case of a dispute, you may find that obligatory arbitration is a concept in your contract. Click here to learn more.
The very essence of the ADR approach is to achieve results with minimal time and expense pressure on clients in legal matters and is therefore ideally tailored to companies that need legal services, but at a proportionate expense. At Advocko, we are experienced in directing clients into the best dispute settlement process for them. Where businesses have already selected an effective ADR approach to solve their problems, our highly qualified panel of ADR practitioners and tailor-made concierge services allow them to concentrate on solving their problems and concentrate on their development.