More than half (55%) of small and medium-sized enterprises (SMEs) in the UK do not have an ethics policy in place, according to Close Brothers Asset Finance.

Also known as a code of ethics, an ethics policy defines the essentials of how people within an organisation will interact with one another, as well as how they will communicate with any customers or clients they serve and any vendors or suppliers that they come into contact with. Two in five (41%) small and medium sized companies say they do not have an ethics policy because it’s something they feel they don’t need.

The quarterly survey of UK SME owners and senior management from a range of sectors also implied that size does really matter when it comes to ethical policies, with over a third (37%) of these businesses believing they are too small to worry about these guidelines and a further one in ten (12%) believing only large companies need to have them.

Mike Randall, CEO of Close Brothers Asset Finance said: “With business growth high on the agenda for many SME owners in 2016, the importance of good ethical behaviour will play an increasing role in how their businesses are perceived, both internally and externally. Discussions around ethical policies must be a priority if businesses are to reach their full potential.”

Despite a significant number of UK SMEs feeling they don’t need an ethics policy, over half (56%) stated that they have been on the receiving end of unethical business practices, with one in ten (8%) businesses saying it happens ‘a lot’ and over a quarter (27%) stating it happens ‘on occasions’.

Over half (52%) of UK SMEs get questioned about ethics in their supply chain, with this happening all the time or on an increasing regular basis for a fifth (19%) of SMEs.

Mr Randall said: “Nearly three quarters of the firms we talked to said that success is dependent on high standards of business ethics. With this in mind, it is clear that good trusting relationships with clients, employees, suppliers and the community are vital in business.

“Business owners and managers will also recognise the importance of trust and ethics when they are on the receiving end of ‘unethical business practice’. Even though many smaller organisations have an informal understanding about how business is done, there are clear advantages to having a formal code in place – not least because they will inform business practice and greatly enhance the organisation’s reputation.”