New research shows small businesses in Scotland face many of the same challenges as individual consumers, but have fewer protections and more limited access to help and support when things go wrong.
The study, based on a survey of 700 small businesses, found greatest dissatisfaction in the energy, water and telecoms markets with a direct impact on performance, including turnover and profitability.
Small businesses are vital to Scotland’s economy. Scotland has around 350,000 small businesses - defined as those employing up to 50 employees - accounting for the vast majority of businesses in Scotland and employing over 900,000 people.
Key findings include:
- Small businesses are just as likely - and in some cases more likely - than individual consumers to experience problems when purchasing goods and services with nearly half reporting problems including unclear contract terms, poor service quality and delivery failures
- Despite this, small businesses often have lower levels of legal protection, fewer rights and less access to advice and redress than individual consumers
- Satisfaction levels vary significantly across markets, with energy, water and telecoms performing worst out of 11 markets studied
- Energy market dissatisfaction was particularly pronounced, with one in five
businesses reporting problems including contacting energy suppliers, understanding bills and unfair terms and conditions - A particular issue in the energy market was reliance on Third Party Intermediaries to secure contracts with examples of mis-selling and misrepresentation or products, inconsistent approaches to consumer protection, poor customer service and lack of access to dispute resolution
Recommendations from the report include:
- Raised standards in the energy and water sectors by enforcing protections and strengthening regulation of Third Party Intermediaries
- The Scottish Government to work with small business representatives and consumer advocacy and advice bodies to improve access to consumer and contract law information
- Regulators including Ofgem, Ofcom and the Financial Conduct Authority to put in place enhanced monitoring of the issues faced by small businesses, including complaints data, to identify improvements
- Regulators to regularly review the effectiveness of the information provided to small businesses to ensure it meets their needs
Director of Analysis and Research at Consumer Scotland David Eiser said:
“Until now, the impact of consumer issues on small businesses have tended to receive less attention than many of the other challenges they face.
“Given the critical importance of small businesses to the Scottish economy, it is imperative they are not impeded by a lack of information, poor service, or unclear routes for redress.
“This research shows too many businesses face avoidable problems that can affect their profitability. This is not just bad for the individual businesses and their employees – it also has an impact on Scotland’s economy.
“We need to ensure small businesses get a better experience when buying goods and services and that they also have access to clear information, fair treatment and effective help when things do go wrong.
“Improving the confidence of small businesses will allow them to thrive and will support wider economic growth.”
In addition to working with partners to take forward our key recommendations, Consumer Scotland will produce a follow-up report looking in more detail at recommendations for the energy market.
Background
The business of being a consumer
The report uses the term ‘small businesses’ to include both micro and small businesses which employ fewer than 10 and 50 employees respectively.
The research included a telephone survey of 700 small businesses in Scotland with questions covering 11 consumer markets. The research also involved a review of existing research and policy, and discussion with key stakeholders.
Consumer Scotland is the statutory consumer advocacy body for Scotland.