Corporate report

Statutory review of the Small Business Commissioner response to views and evidence

Updated 8 March 2024

Introduction

Under section 10 of the Enterprise Act 2016, we are required to conduct a statutory review of the Small Business Commissioner’s performance, particularly their effectiveness in carrying out their functions. 

In line with the legislation, we are also looking at the impact of the Commissioner’s work on:

• improving commercial payment practices and
• small business’ awareness/use of alternative dispute resolution.

Between 15 February 2023 and 28 April 2023 we invited stakeholder views on specific questions to inform this statutory review.  This document summarises stakeholders’ responses and presents the statutory review’s findings as part of the wider payment and cash flow review.

Background on the Small Business Commissioner

The Small Business Commissioner (SBC) is an arm’s length body of the Department for Business and Trade established under Part 1 of the Enterprise Act 2016.

Launched in December 2017, the Commissioner leads an operationally independent office, providing support to small businesses especially in relation to the issue of payment disputes with their larger business customers, including what action to take if a payment is overdue. This can include general advice and information to small businesses in connection with their supply relationships with larger businesses, including signposting small businesses to existing support and dispute resolution services. Information and advice are primarily delivered through the Commissioner’s website, which any business can access.

The Commissioner also considers and investigates complaints from small businesses (those with fewer than 50 employees) relating to payment matters in connection with the supply of goods and services to larger businesses (those with 50 employees or more). Following investigation and consideration of the complaint, the Commissioner can make non-binding recommendations as to how the parties could resolve their disputes. Under existing legislation, the Commissioner can only investigate poor payment practice when a small business complains directly and when such a complaint conforms to the requirements of the Small Business Commissioner (Scope and Scheme) Regulations 2017.

The Commissioner also has the power to publish a report of the inquiry into, and consideration and determination of, a complaint. Upon consideration of the relevant factors, that report may name the larger respondent business. The report may highlight poor payment practices of the larger business and equally may praise good payment practices.

A key focus of the work of the Commissioner is to empower small businesses to resolve payment disputes with larger businesses and avoid future issues by encouraging a culture change in payment practices and how businesses deal with each other. The Commissioner does not have the power to proactively investigate poor payment practice, even when there is evidence or intelligence to suggest this is occurring.

Summary of responses to the statutory review questions

In total there were 99 responses from individuals and organisations which were received in combination through GOV.UK and the Responsible Payment Culture mailbox. Overall, 98 different businesses, individuals and associations were represented in the responses. Most respondents were responding on behalf of small businesses, including a number of representative bodies. There were also some large businesses and individuals among respondents. A wide variety of sectors were represented, spanning construction, manufacturing and a variety of service sectors. 

1. How aware do you think businesses are of the role of the Small Business Commissioner? How aware would you say you are of the SBC’s role as set out in this statutory review document?

There were 98 responses to this question.  Most respondents felt that businesses, particularly smaller businesses, were largely unaware of the existence of the SBC and unaware of its role.  Respondents commented that it would be helpful if awareness could be increased.  Several respondents also said the role appeared unclear.   Some pointed out that trade associations and umbrella bodies tended to be more aware of the SBC and could do more to signal its existence to small businesses when required.

2. Have you had any interactions with the SBC?

a. yes

b. no

There were 99 responses to this question. Of these, 47 respondents said they had had interactions with the SBC while 52 said they had not. 

3. If yes,

(i) how often?

a. regularly (more than twice a year)

b. occasionally (more than once a year)

c. rarely (one or more times since SBC formed)

In total there were 50 responses to this question. Of these, 22 said they had interacted with the SBC regularly, 7 said their interactions were occasional and 21 said they interacted rarely. 

(ii) Has your interaction with the Small Business Commissioner mainly been as a

a. trading business

b. stakeholder with an interest in SBC’s activities

There were 55 responses to this question in total.  Of these, 23 were from a trading business, and 32 were as a stakeholder with an interest in SBCs activities.   

(iii) How satisfied are you with your dealings with the SBC?

a. Very satisfied

b. Satisfied

c. Neutral

d. Unsatisfied

e. Very unsatisfied

There were 52 responses to this question. Of these, 19 respondents said they were very satisfied with their dealings with the SBC; 12 respondents said they were satisfied; 14 respondents felt neutral about their interactions; 2 respondents were unsatisfied; and 5 respondents were very unsatisfied. Whilst this is a relatively small sample it indicates that the SBC has been providing a satisfactory service to the majority of those that it works with. However, there is clearly scope to improve rates of satisfaction further.

4. In your view, what impact, if any, has the SBC had on your business relationships (for example, with business suppliers or business customers), and/or business relationships between business suppliers and business customers in general?

There were 96 responses to this question.  The answers to this question were polarised.  Where stakeholders had interacted with the SBC, they felt it had had a positive impact on business relationships.  Several mentioned the importance of the SBC’s existence in ensuring that payment issues remain on the policy agenda. Others referenced that the prompt payment code administered on behalf of government by the SBC had a positive impact in maintaining and raising awareness of payment issues. However, a substantial number of respondents (46) said that the SBC has had limited or no impact in general on business relationships. Several said this could be due to lower awareness of the SBC, or insufficient resources or powers available to the Commissioner.

5. Do you think that resolving a complaint between business suppliers and business customers has become easier or harder since the establishment of the Small Business Commissioner? Why?

There were 95 responses to this part of the question.  Generally, respondents felt that limited awareness of the role and responsibilities of the SBC means that, overall, there has been little change in the difficulty associated with resolving complaints between business suppliers and business customers.  A few respondents said that it was important to have an available independent route for resolution as provided by the SBC, and the use of this or the threat of the use of this had been helpful in resolving complaints between suppliers and customers.

6. What do you believe has been the impact of the SBC on payment issues?

There were 96 responses to this part of the question.  Again, the answers to this question were polarised. A substantial number felt the SBC had had a limited impact. Others felt its existence helped maintain a clear focus on this issue and that the advice the SBC provided was useful.  Some respondents mentioned remit and power constraints as factors limiting the SBC’s effectiveness.  It was also pointed out that consolidation of payment initiatives into one body had been useful where that had taken place citing the example of moving the administration of the prompt payment code into the SBC.

7. In your view, is the role of the Small Business Commissioner sufficiently clear? How would you explain the role?

There were 95 responses to this part of the question.  Many respondents (43) thought the role was not sufficiently clear.  Some respondents said the role was clear once they had reviewed the information available. Those who did feel the role was clear said that it included functions like handling complaints, providing advice, acting as a mediator or ombudsman, representing small businesses, and administering the prompt payment code.  Generally, even respondents who thought the role was clear said that it could be clearer.

8. How effective do you consider the SBC has been in exercising the powers of the office?

a. running a complaint scheme

There were 90 responses to this question. Of these 9 respondents considered that the SBC has been very effective in running a complaint scheme, 16 said the SBC had been effective, 48 felt neutral about the SBC’s effectiveness, 7 said the SBC had been ineffective, and 10 said the SBC had been very ineffective.

b. using powers to investigate a report from a small business that they are not being paid by a large business within the terms of their contract

There were 90 responses to this question. Of these, 10 respondents said the SBC has been very effective at using powers to investigate a report from a small business that they were not being paid, 17 said the SBC had been effective, 50 felt neutral about the SBC’s effectiveness, seven felt the SBC had been ineffective and six felt the SBC had been very ineffective.

c. general advice to small businesses on payment issues

There were 92 responses to this question. Of these 12 respondents said the SBC has been very effective in providing general advice to small businesses on payment issues, 24 said the SBC had been effective, 36 felt neutral about the SBC’s effectiveness, 11 felt the SBC had been ineffective and 9 felt the SBC had been very ineffective.

d. drawing attention to the importance of prompt payment and taking steps to improve culture around payment practices

There were 94 responses to this question. Of these 15 respondents said the SBC has been very effective at drawing attention to the importance of prompt payment and taking steps to improve culture around payment practises, 27 said the SBC had been effective, 27 felt neutral about the SBC’s effectiveness, 16 felt the SBC had been ineffective, and nine felt the SBC had been very ineffective.

e. drawing attention to alternative dispute resolution options and approaches

There were 90 responses to this question. Of these, 7 respondents said the SBC had been very effective at drawing attention to alternative dispute resolution options and approaches, 21 said the SBC had been effective, 39 felt neutral about the SBC’s effectiveness, 15 felt the SBC had been ineffective, and eight felt the SBC had been very ineffective.

9. What else could the SBC do to improve payment culture?

There were 89 responses to this part of the question.  There were a wide range of responses.  A substantial number mentioned the need to increase awareness of the SBC’s role. A few responses suggested more resources and greater powers were required by the SBC in order to improve payment culture.  Several mentioned the need for a clear statutory framework for payment times backed up with fines. Others suggested that the cultural practices of some businesses needed to change to improve payment culture.   It was also mentioned that payment culture could be improved if the policy landscape was clearer and more joined-up.

10. The SBC receives fewer complaints than expected. What do you consider are the primary reasons why small businesses tend not to raise complaints with the SBC? Please indicate what you think is the most important reason, and also tick all other reasons that you think apply:

a. Fear of some form of penalty from business customer

b. Do not think the SBC will be able to do anything

c. Any concerns can be addressed in other ways (give examples where possible)

d. The concerns can be more effectively dealt with by a trade association

e. Concerns over confidentiality

f. The SBC’s remit and whether it can help is unclear

g. Other reason (please describe what this is)

Respondents selected more than one reason why small businesses tend not to raise complaints with the SBC. There were 57 respondents who felt that the fear of some form of penalty from their customer would stop them complaining to the SBC.  Forty respondents did not think the SBC would be able to do anything. Twelve felt their concerns could be addressed in other ways. Seven felt their concerns could be more effectively dealt with by a trade association. Twenty-three had concerns about confidentiality of their complaint. Forty-five felt that the SBC’s remit and whether it can help is unclear. Thirty-five gave some other reason.

11. Would the introduction of broader powers for the Commissioner to investigate issues on their own initiative, or as a result of anonymous information, help address the late payment issues faced by small businesses?  What else would encourage you or business in general to raise an issue with the SBC?

There were 89 responses to this part of the question.  Forty-three of these agreed that the introduction of broader powers of investigation for the SBC would help to address late payment issues.  However, many respondents felt it would be necessary to increase awareness and clarity of the role of the commissioner either instead of or ahead of the introduction of wider powers.

12. Please provide any additional feedback on the scope of the SBC’s powers, including the extent to which you consider it enables or restricts the SBC to fulfil the Commissioner’s purpose.

There were 58 responses to this part of the question.

Several respondents mentioned the need to

• raise awareness of the SBC and its role;
• provide more clarity on the SBCs role;
• bring together the various payment policy interventions;
• consider stronger powers as highlighted and discussed in previous consultations.

Views of the Small Business Commissioner Team

The effectiveness of the Small Business Commissioner was also discussed with the SBC team.  Themes from this discussion are summarised here.

• clarity on the name and function of the organisation could be improved. There was a feeling that the current name of the small business commissioner leads to expectations on its role which it does not have a remit to fulfil
• staff felt that they were able to handle complaints effectively within their remit when respondents engaged with the process. However, there were occasions where respondents did not engage, and the SBC felt they had limited mechanisms to resolve that situation.  It was also felt that ‘naming and shaming’ risked losing constructive working relationships
• awareness of the role of the Small Business Commissioner could be improved but the team felt their strategy of ensuring that umbrella bodies and trade representative organisations were aware of their role remained the most cost-effective way of ensuring wider awareness with the resource available
• sometimes smaller firms had not understood the terms of the contract they had signed up to with suppliers, resulting in payment terms that did not support the small business.  The SBC does not have a remit to resolve those situations
• the SBC has a separate legal personality as a corporation sole and was set up as a Non-Departmental Public Body because this was felt to be necessary to ensure the SBC’s independence.  Because of its responsibilities for managing public money effectively the office of the Small Business Commissioner has to undertake activity to provide assurance on governance and accountability. Given its size, the administration of this takes up a substantial proportion of the office’s resources

Summary of findings

The purpose of this review is to establish how effective the commissioner has been in carrying out their functions. 

Responses to the review showed that while there was continued support for maintaining the role of a Small Business Commissioner, a substantial number of respondents to the consultation said that the SBC has had limited impact in general on business relationships. The key reasons for this included:

• the SBC has insufficient resources or power, and that payment culture could be improved if the policy landscape was clearer and more joined-up
• there is low awareness of the SBC, and awareness needs to increase to have more of an impact
• the cultural practices of some businesses needed to change to improve payment culture with some respondents suggesting a statutory framework for payment times backed up with fines

As a result, the current functions delivered by the SBC could be made more efficient and effective by being more joined-up with other similar functions. 

The Government intends to undertake reform in several areas, some of which will be subject to the availability of primary legislation to make these changes in the future:

Closer Integration of the Small Business Commissioner with the delivery of other Late Payment interventions

Government will take forward a restructuring of resources of the Office of the Small Business Commissioner (OSBC) and the DBT policy team. This would allow the existing complaints process and other enquiries and advice to businesses to remain the responsibility of the SBC, with DBT staff providing support. Enforcement and compliance of the PPR and PPC would also be delivered by the support team working more closely together across DBT and SBC. This would enable more effective use and coordination of the available resources, and a simplification of the policy landscape, as suggested by the respondents to this review.

Some of these changes will require primary legislation and will therefore be subject to the legislative timetable.  In the medium term, we will take steps to bring the administrative functions supporting the SBC into closer working with Department of Business and Trade Policy Teams. 

Raising awareness through improved engagement, communications and tools

The restructuring as set out above should free up resources to undertake greater outreach and increase working with stakeholders. In addition, the Government will increase awareness of the role of the Small Business Commissioner through Ministerial activity and through its business support programmes (see Education & Advice Chapter).

There is also misunderstanding regarding the role of the Commissioner. Some of this relates to the name, with businesses assuming they have a broad role to support small businesses. We will therefore change the name of the Commissioner to reflect the role more closely. This change will require primary legislation.

Broader powers for the Small Business Commissioner

We also intend to introduce broader powers, through primary legislation,  to enable the commissioner to investigate issues on their own initiative following anonymous complaints or on the basis of intelligence. We did not feel there was a strong case for more punitive powers for the commissioner at this stage, particularly given that one of the main reasons small businesses cited for not involving the Commissioner was a concern about maintaining relationships with the large businesses they supply.

The payment and cash flow review document discusses these matters further as part of its wider findings.