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Give SMEs access to redress to boost recovery

Ombudsman Services | Nov 25, 2020

Policymakers are being urged to give any SME with an unresolved energy or telecoms complaint access to independent redress.

Ombudsman Services, which handles complaints in both sectors, says the move would boost the post-Covid economic recovery by helping small and medium-sized firms survive and thrive.

The call comes after an Ombudsman Services and Deltapoll survey of more than 1,000 small businesses found that the larger the company, the more likely it is to want to take an energy or telecoms complaint to a third party for redress.

For example, the proportion that would seek third-party resolution of a complaint rises from 36% for companies with the lowest annual turnover to 54% amongst those in the highest turnover bracket of more than £250,000.

Larger businesses were also more likely to have had an energy or telecoms complaint that they needed help with during the UK-wide lockdown in the spring – and more likely to complain.

The larger the business, the more likely it was that one of its lockdown complaints related to energy or telecoms as opposed to other sectors.

SME Coverage Graph

Currently, only small businesses with up to 10 employees can take a telecoms complaint to Ombudsman Services.

In energy, the company must have fewer than 10 employees and meet additional eligibility rules based on its gas and electricity consumption, annual turnover and balance sheet.

Only businesses that fit inside the definition of a microbusiness can go to the ombudsman for help with an energy complaint.

Matthew Vickers, chief executive at Ombudsman Services, says the not-for-profit organisation is regularly forced to “turn away” businesses because they are too large.

He wants access to alternative dispute resolution (ADR) in energy and telecoms to be extended and brought in line with financial services.

In that sector, the Financial Conduct Authority (FCA) widened the remit of the Financial Ombudsman Service (FOS) in April 2019. SMEs with up to 50 employees, an annual balance sheet below £5m or an annual turnover of less than £6.5m can now refer complaints to FOS.

We’d like to see SMEs given the same access to free, independent dispute resolution in energy and communications that they have in financial services

Matt Vickers, CEO & Chief Ombudsman | Ombudsman Services

“As things stand, if a business wants to bring an unresolved complaint to us, we can only help if it’s a microbusiness that meets a very narrow definition. “Taking the matter to court is an option for the business, but it has always been an expensive and time-consuming one. The current backlog in the courts will make it even more unpalatable.

“We’re having to tell larger businesses that we simply can’t help them because of the rules that govern us. This has always been frustrating for both us and the business involved, but especially so given the pressures that SMEs are facing due to Covid-19 and the lockdown.

“A disputed energy or phone bill could be the difference between an SME failing and surviving. We want to be able to help these companies – they are the lifeblood of the economy and it’s vital that they have somewhere to go when things go wrong with important services like energy and telecoms. Last year’s changes in financial services gave an additional 210,000 SMEs access to independent dispute resolution in that sector, so it’s reasonable to assume that the same number are currently being denied access in energy and telecoms.”

Vickers is calling on government departments and regulators in the two sectors to work together to open ADR up to all SMEs.

He added: “Regulators in both sectors are quite rightly doing a lot of work to support and protect microbusinesses.For example, in energy Ofgem recently published proposals designed to ensure that microbusinesses get a fair deal when using energy brokers. These developments are encouraging but we do think it’s important that larger SMEs also benefit from enhanced protections.”

The Federation of Small Businesses (FSB) and Kevin Hollinrake MP have both backed the call for an extension of the remit of Ombudsman Services. Federation of Small Businesses (FSB) National Chairman Mike Cherry said: “The cap on firm sizes that can access Ombudsman Services appears increasingly arbitrary, preventing small firms just out of scope from accessing much-needed support.

Small firms that have a dispute with their energy or telecoms provider shouldn’t have to seek costly legal advice and spend time pursuing justice through the courts when the mechanisms to support them exist.

Mike Cherry, National Chairman | Federation of Small Businesses

“During the national lockdown, larger businesses were more likely to have an energy or telecoms complaint, so excluding some firms from fast-track access to support could see them shut altogether and be very damaging to the economy.

“At a time when a disputed bill could be the difference between surviving and failing, this discrepancy in available help between firms with more than ten employees and those with fewer than that is especially stark and frustrating and must be addressed before it’s too late. We propose that the limit is aligned with the accepted definition of a small business, i.e. 50 employees.

“The Financial Ombudsman Service had its remit widened successfully so we know it can be done.”

Kevin Hollinrake MP said: “Small and large SMEs suffer exactly the same ‘imbalance of power’ problem when it comes to dealing with large, often faceless organisations.

“Ombudsman schemes work to ensure fair treatment when disputes arise and has a significant deterrent effect that drives accountability, responsiveness and better service. I wholeheartedly support this expansion of the remit of Ombudsman Services.”

The survey of microbusinesses was carried out by Ombudsman Services in June and forms part of ongoing research for the organisation’s seventh annual Consumer Action Monitor (CAM) report.

The 2020 CAM report will be published soon.