In the latter case, all the victims are consumers, and are entitled to the support of financial regulators as they seek justice. The picture for SMEs is less clear. Regulators – first the Financial Services Authority and now its successor, the Financial Conduct Authority – take the view that some SMEs are "sophisticated", and should not fall within the remit of the automatic review of interest rate swap mis-selling it has ordered.
The argument is that some businesses were mature enough to understand the risks they were taking in buying interest rate swaps – at the very least that they had the resources to take proper advice. And these contracts weren't necessarily inappropriate for many businesses, since they offered potentially valuable insurance against interest rate rises. The issue is whether businesses understood the downside risks of the cover.
The difficulty is it has not been possible to come up with a precise definition of sophisticated. Under the FCA's rules, businesses that bought interest rate swaps with a contract value of more than £10m generally do not qualify for the review, but there are other criteria to consider too. Some SMEs with a far from sophisticated understanding of financial services may miss out on the review while others, which did know what they were doing, qualify.
Those that miss out have little option but to begin legal proceedings if they wish to claim compensation. Developments in one such case underline just how fraught and time-consuming this process can be. Business partners Paul Rowley and John Green have been embroiled in a court battle with Royal Bank of Scotland for more than a year over the interest rate swaps it sold them. Their claim was rejected last December but an appeal will start at the end of July. The case is worth watching since the original verdict, based on the argument that the bank provided information rather than advice, was handed down before the FSA said it thought 90 per cent of interest rate swaps had been mis-sold.
Seeking redress for interest rate swap mis-selling will be far more straightforward for businesses that qualify for the regulatory review. Last month, the FCA gave many banks permission to begin approaching SME clients in order to begin that process. Those outside the review may have to wait much longer – and some victims of mis-selling will never bring a case.
Small businesses are getting better at using the services of regulators. Figures published today by the independent finance provider Syscap reveal that 612 SMEs took complaints about loans and overdrafts to the Financial Ombudsman in 2012, a 17 per cent increase on the 522 cases in 2011.
However, only businesses with an annual turnover of less than €2m (£1.7m) and fewer than 10 employees are entitled to use this scheme. Other SMEs must resort to legal action.
A line has to be drawn somewhere. When a company reaches a certain size, it must take greater responsibility for its decisions than would be expected of consumers and smaller businesses. Still, as we continue to work to encourage SMEs to grow and create jobs, there may be a case for shifting that line in favour of small businesses.
Eco City cabs driving into the black
Look out for annual results from the Alternative Investment Market-listed Eco City Vehicles, which supplies Mercedes black cabs to London's taxi drivers.
Due early this week, the 2012 figures will show a 33 per cent increase in sales, to more than £30m, thanks to the growing popularity of the company's Vito cab. The company is also back in profit, to the tune of £800,000, after a £1m loss last time out.
Eco City has benefited from new rules that impose a 15-year age limit on London cabs, but it was boosted by the travails of rival Manganese Bronze, which slipped into administration before being rescued. That helped Eco City to double its share of taxi sales to about 40 per cent.
One man who clearly believes it is going places is Nigel Wray, the serial entrepreneur, who owns just over 15 per cent. Watch out for an update on rumours that it plans new ventures.
Tech City 'is hampered by lack of skills and capital'
Is Tech City really the vibrant success story that many, including the Government, are so keen to celebrate?
As the Shoreditch Digital festival begins today, promoting the small part of east London that has become home to so many technology sector start-ups and SMEs, research suggests that businesses there are finding the going much tougher than one might imagine.
The festival, featuring events with speakers from "successful and innovative" Tech City companies, offers an opportunity to network and swap experience and advice. But the market research agency GfK, which has surveyed half the 1,350 businesses there, says many are having real difficulties. A lack of skilled workers is restricting growth at 77 per cent of these firms, GfK says, while 33 per cent warn a lack of access to capital is hindering their business.
Tech City businesses were also notably sniffy about the support they've had from policymakers. Though ministers, from David Cameron down, have made visits, GfK documented criticism of official initiatives that appeared to be more about PR. "Our research shows Tech City is at a tipping point," said Ryan Garner, GfK's research director.
Small Business Man of the Week: Greg Isbister, founder, Blis Media
I launched my business in 2004. In my final year at university I'd worked on a project to transmit media wirelessly; when the first Bluetooth phones came out, I understood the technology well.
"I started out with a £5,000 loan from the Prince's Trust. The one thing I was told was 'Don't give up the day job,' but I ignored that advice. Our business now is to act as a real-time seller of advertising. When someone opens a website, our technology looks at who and where they are, and the website they're opening; then, within 60 milliseconds, we auction the right to sell a personalised advert to that web browser. Our revenues come from commission on the sale. Business is growing very quickly – in the past three years, sales are up 78 per cent and we expect 2013 revenues of £5m.
"It's been hard work; when we started out, the service was based on text messages. We've now worked with more than 400 brands. The smartphone really transformed our business.
"The Prince's Trust was very patient, but we were finally able to pay it back. I've just moved to Singapore to build up our Asian business – it feels as though I'm in start-up mode all over again.
