This is what the survey revealed
The latest YouGov survey looking at legal costs for small to medium sized businesses in the UK (SMEs) shows some shocking results including the fact that UK SMEs are losing more than £13.6bn per year or nearly £7m an hour from neglecting their legals. For the individual SME that means experiencing on average eight legal issues every year. With around 5m SMEs in the UK, making up 99 per cent of the private sector, they are the lifeblood of the UK economy and so this potentially has a very significant impact. This makes particularly interesting reading in a post-Brexit, pre-election environment, which already includes new inflation and tax pressures on the UK’s smaller businesses.
The survey (commissioned by online legal tech firm LawBite) was taken from SMEs across 20 business sectors and analysed by Cebr (Centre for Economics and Business Research) at the end of 2016, with the results being officially released by LawBite today.
The most common legal issues faced by the UK’s five million SMEs day-to-day were found in five key areas:
● Disputes (13.2 per cent)
● Employees and Key Contractors (12.5 per cent)
● Customers and Suppliers (11.4 per cent)
● Terms and Conditions (9.2 per cent)
● Software (9.1 per cent)
With the highest amounts estimated to have been lost in:
● Disputes (£1.7bn)
● Employees and Contractors (£1.6bn)
● Customers and Suppliers (£1.6bn)
Given the number of incidences of these kinds of issue, SMEs are over-optimistic about the prospects of future losses occurring because of these problems, with only 12 per cent thinking these issues are ‘likely to pose a significant risk’ to their business. Interestingly, this percentage more than doubles (25 per cent) when they are asked to forecast whether these problems are likely to affect other businesses rather than their own.
Clive Rich, LawBite Chairman said “SMEs wrongly assume that risky outcomes are more likely to happen to other businesses than to themselves.”
A likely cause for these extraordinary levels of loss is SMEs’ reluctance to use lawyers. The Survey reveals a deep unease with traditional law firms. Only eight per cent say that legal fees are good value for money. Only one in five SMEs rate law firms as ‘good’ in terms of ease of access and over 70 per cent of respondents say that legal documentation is not easy to understand.
There appears to be a direct correlation between the negative attitudes of businesses to using lawyers (and law firms) and the amount they are at risk of losing per year. There is a reluctance to spend money on something they believe to be expensive, slow and generally inaccessible.
The good news is that, new, emerging law-tech firms such as LawBite provide fast and simple access to expert lawyers at a fraction of the usual price. Such firms are shaking up the legal landscape and proving to be a disruptive force in a typically traditional industry, using technology to slash costs by half in most cases. At LawBite, for example, SMEs can take a free Legal Health Check in the first instance to identify their legal risks and speak to an expert lawyer to prevent or reduce potential damage to their business.
Technology continues to be a dominant force for change across all industries and can prove to work in the favour of smaller UK businesses, where reducing costs is so crucial to their success.