Businesses groups have warned firms may be unable to access redress after the Financial Conduct Authority (FCA) decided against expanding SME access to the Financial Ombudsman Service (FOS).
The FOS was established in 2000 to settle disputes between businesses and financial firms without going through the courts, which can be extremely expensive.
After expanding access in 2018, SMEs are able to access the ombudsman service if they have a turnover of less than £6.5m and fewer than 50 employees. Businesses can also access the service if their balance sheet is less than £5m.
The FCA estimated the thresholds cover 99 per cent of the 5.6m private sector businesses in the UK.
“We have decided that this level of coverage remains appropriate and that it would not be proportionate to extend access to SMEs larger than the current criteria,” the FCA said.
The FCA noted that the Business Banking Resolution Service (BBRS) exists as a top-up service for larger firms, and has seen very low levels of demand.
“The low numbers of complaints referred under the contemporary scheme suggest to us that there is not a strong demand from larger SMEs,” the watchdog said.
But business groups have warned that the decision not to expand access means some firms will struggle to access compensation.
William Wragg MP, chair of the Fair Business Banking APPG, said small businesses have been “left to fend for themselves yet again”.
“If we want to encourage growth and innovation we have got to give SMEs the reassurance that any dispute with their lenders will be dealt with fairly and efficiently,” he continued.
Jonny Haseldine, policy manager at the British Chamber of Commerce (BCC), said that “tens of thousands of firms [were still] in danger of falling through the cracks” following the decision.
Small businesses that are too big to access the FOS face huge disadvantages when going to court with banks because of the enormous discrepancy in resources.
Tina McKenzie, policy chair, Federation of Small Businesses (FSB) said “a small business will just not be able to sustain a drawn-out legal dispute, with all its associated costs in terms of money, time, and stress”.
The FSB called on the government to create a banking tribunal service which would be able to take on more complex cases.