27 May 2020

Dear friends and colleagues,

Last week, we published the interim findings from our Live Pilot, which we are using to shape our innovative service. Our report also demonstrated that the system for handling SME complaints against their banks needs a deep rethink if we are to ensure we do not repeat the mistakes of the financial crisis, and if we are to prepare for a difficult future.

The crisis is going to send the UK economy into its sharpest recession on record. This will create a severely challenging environment for the country’s almost six million small and medium sized businesses.

The Government announced “temporary, timely and targeted measures” in March to support public services, people and businesses. Together with the banks, it is providing financial aid measures to the economy at an unprecedented scale, much of which comes in the form of bank loans.

Government-backed loan schemes have provided a lifeline. But it is critical for customers to understand that, just like any other loan, they will be required to repay 100% of the money they borrow under these new schemes. There needs to be clarity about that now to avoid the risk of storing up problems for the future. The banks have been working hard to support many of their SME customers in this context. The BBRS will not have access to a ‘magic wand’ to wish away unpaid loans.

But, even with that message out there, we equally need to be clear that the covid-19 loans and inevitable economic pressures ahead have the potential to give rise to a significant volume of complaints. The BBRS is ideally placed to consider complaints – where they are within our scope – that cannot be resolved by participating banks themselves.

It has never been more important for British businesses to get fair treatment from their banks. Doing so will, in turn, safeguard the reputation of the sector. The BBRS will play a vital role in making sure this happens.

Today, we are looking ahead to what the landscape might look like after the crisis. It is clear that all of those involved in business banking disputes need to be ready for an increase in the volume of cases each requiring patient and careful attention. Once fully launched, we hope other lenders will be inspired to join the BBRS too, enabling us to extend the offer of this crucial service to more SMEs and banks across the UK. Foreword by Lewis Shand Smith Lewis Shand Smith Chairman of the BBRS

To explore this issue in greater depth, we polled a representative sample of 500 UK small businesses decision makers and owners about their experiences with the current covid-19 support schemes.

The results speak for themselves and show that, while they have played a crucial role in saving many businesses and livelihoods, the aid schemes have the potential to create a wave of post-crisis disputes.

There are some striking findings:

• Almost a third (29%) of customers state that they have experienced behaviour from their bank this year that would give them cause to lodge a complaint; encouragingly, 75% expect their bank to handle a complaint transparently and fairly, but a significant minority (20%) do not
• 66% would be willing to challenge their bank in the courts if needed
• 56% of our respondents stated that they have taken out a loan as part of one of the covid-19 support schemes. 43% of those who have taken out these Government-backed loans say they do not expect to repay them, either because they do not think they will be able to or because they do not think that the Government will pursue the debt (it is, in fact, in most cases the bank’s job to do this)
• 37% of SME decision makers said they would consider swapping the debt for the Government taking equity in their business, an idea which has been floated in some quarters
• One third of respondents (33%) are aware of the BBRS and 82% agree that lenders accredited by the Government loan schemes should participate in the BBRS

These are clearly challenging statistics, and they require all of us to be ready to offer a way of resolving past and future disputes in a manner that removes the stress, acrimony and costs for those involved. Doing so will enhance the reputation of the banking sector and help build future customer relationships based on trusting partnership