Funding cuts, contract changes and other effects of government changes to the NHS have already impacted surgeries’ bottom lines. This, along with uncertainty and near constant funding and regulation changes in the industry, means they have suffered disproportionately from the financial products; this is according to law firm Berg a specialist in the area.
As a result, many are being put under extreme financial pressure and some are being forced out of business, as they battle against large monthly payments or huge contract breakage fees.
As many as 100k businesses may have been mis-sold interest-rate swaps, which hedged against the risk of rising interest rates yet imposed massive charges when rates were lowered by the Bank of England following the recession in 2008.
Berg is currently advising more than 40 businesses on mis-sold swaps, of which about 10 per cent involve GPs and dentists.
Alison Loveday, managing partner at Berg, said: “Businesses of all types have been hit hard by the interest-rate swaps but GPs and dentists have really suffered. As we know, juggling patient care with running a profitable practice is difficult at the best of times.”
“For businesses like these to suddenly be faced with huge costs because of financial products mis-sold to them can be crippling. Many simply don’t have the working capital to pay the large interest payments and similarly cannot afford the penalties to break the agreements.”
“Against that background, it is no surprise that some are being pushed close to the edge. The guidance from us is to seek professional advice immediately to look at whether an interest-rate swap was mis-sold by a bank. It could result in a significant damages claim or assist in opening up a dialogue with the bank concerned.”
Four of the UK’s five major high-street banks have already set aside more than £650m to deal with compensation arising from mis-sold interest-rate swaps. Berg expects that pot to top £1.5 bn in the first half of 2013 as banks reassess the situation and Lloyds TSB, one of the largest business banks, announces its provision.