Member Article

Why SMEs should go their own way as UK corporates rack up record fines

Last week marked the beginning of innovation body Nesta’s search for this year’s top 25 European corporate stars, recognising some of the continent’s biggest names who have most vehemently supported the startup scene.

Favourable procurement terms, mentoring and technical support are all taken into consideration, to both recognise and promote greater cross-pollination between smaller firms and their bigger, brawnier corporate cousins.

It’s a noble endeavour, but one whose timing is prescient following a string of misdemeanors from some of the UK’s biggest corporate names.

Chief amongst them is retail magnate Philip Green, whose mistreatment of doomed British retailer BHS and subsequent pensions black hole was compounded last week after it was revealed that his Arcadia Group was suffering from a possible £1bn deficit of its own.

Then there’s BT which received Ofcom’s largest-ever fine of £42m last week after it was found to be stiffing its telecoms rivals of compensation due to service delays through its Openreach subsidiary.

Not to mention the recent accounting debacle at BT’s Italian arm or the Rolls-Royce bribery scandal, nor the string of outrages rumbling on at some of the UK’s biggest banks which are beefy enough for separate article entirely.

Oh and Tesco of course, which agreed to pay out £235m just last week in settlements after the Serious Fraud Office’s investigation into its accounting scandal in 2014.

It is fair to say that the last few weeks, or for that matter the last few months, haven’t been one to remember for the UK’s big firms or UK capitalism is general.

Corporate malpractice and skullduggery is nothing new, they’re as old as capitalism itself and are an almost inevitable consequence of an organisation becoming so vast and sprawling that it loses sight of its moral and ethical obligations.

But where to startups and SMEs fit into this?

With some of the UK’s biggest companies indulging in such wanton disregard for the rules of the market or fair play, the question of why we should want to ingratiate startups and SMEs into their sordid orbit naturally arises.

The Prime Minister has made repeated references to ‘responsible capitalism’ and wanting to clean up UK corporate culture, expounding the view that the UK’s big firms and financiers have an example to set to others and society as a whole.

It’s an admirable outlook, but one that has had little impact thus far and is likely to slip further down the list of the PM’s priorities now that the Brexit negotiations have kicked off.

In reality, it is going to be up to industry to keep itself in check and while regulators such as the SFO and FCA seem to be taking a harder line than they might have done even just a decade ago, it is very unlikely the examples of the last few months will be the last major scandals on these shores.

As such, while SMEs and startups will always be beholden to big corporate businesses for support, contracts and services, they would do well to learn from their errors.

The journey from startup to scalueup and beyond is a difficult route fraught with hazards; not just unlocking the right funding and accessing the necessary talent, but maintaining the culture and oversight of an organisation as it grows from its humble beginnings.

Keeping their moral and ethical obligations front and centre as they expand will not only allow a startup remain true to their roots, but could also mean avoiding reputation shaking, share price wrecking multi-million pound fines in the process.