Business Banking Resolution Service (BBRS), the voluntary ombudsman set up to handle any banking dispute between small businesses and high-street banks, has cost £23m to establish.
Seven high-street banks have split the £23m setting-up cost of the banking dispute service between them, so no taxpayer money was involved.
But BBRS has yet to pay out damages to any small business since its launch was delayed from November until mid-February.
The BBRS said that it hopes to settle its first disputes between wronged small business borrowers and banks by the summer.
About 500 disputes were pre-registered with the BBRS before its mid-February launch, and it has 160 “live” cases going through at the moment, plus another 48 new cases register since February 14.
The BBRS was set up after thousands of companies were damaged by banking scandals. It gives small businesses an independent view on banking disputes. It is funded by seven banks but is independent of them.
Conservative MP Kevin Hollinrake, co-chairman of the all-party parliamentary group on fair business banking, described the setting-up costs to The Times as “eye-watering”.
For example, £9.2m was spent on “third-party delivery costs” to get the dispute resolution service up and running, according to the newspaper. Accountancy firm EY is understood to have been the main beneficiary.
Legal costs were £5.7m, while outsourced PR handling cost more than £500,000
About £3.3m has been spent on “integrating” the charity Centre for Effective Dispute Resolution, which will handle day-to-day mediation of disputes.
Total staffing costs were £3.1m over the 18-month accounts period, with an average of 14 employees, implying an average salary of over £220,000 per person.
Alexandra Marks, a High Court judge who is its highest-paid director, was paid £505,000 for 18 months’ work. By comparison, the prime minister is paid less than £200,000 a year.
Explaining what, on the face of it, seem very high setting-up costs, the BBRS pointed out that its banking dispute resolution service is unique and it had to be created from scratch, involving a complex seven-way agreement between banks.
It urged small businesses to come forward and use its service.
The BBRS told SmallBusiness: “We’ve only just begun. We want small businesses to register with the scheme as we’re starting to process claims. And the sooner people register, the better. We’re pushing hard for those eligible for compensation to use it.”
Craig Beaumont, chief of external affairs at the Federation of Small Businesses, told the Times: “Small businesses seeking redress will be looking at these big sums and expecting big results.”
However, Kevin Hollinrake MP pointed out that if the BBRS satisfies its requirement to provide justice and fair compensation of potentially hundreds of millions of pounds to businesses and individuals, then the £23m will be money well spent.
Last week, the BBRS announced that CEO Samantha Barrass was stepping down to be replaced by interim CEO Mark Grimshaw, former CEO of the Rural Payments Agency.