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Small businesses are being overcharged by as much as £3.6bn annually

12 September 2011

Small businesses are being overcharged by more than £3.6 billion for goods and services according to new research by UK-based B2B group buying website Huddlebuy.co.uk. The research found that businesses with fewer than ten staff - which employ more than 4.5 million people across the UK - are paying up to three times more for goods and services than larger companies. Huddlebuy undertook an analysis of each company's resource requirements by size and industry based on its knowledge of the sector.

A typical UK start-up faces an additional bill of £1,200 each year for each employee compared with established big businesses. With 396,000 new businesses created in the UK in the year to March 2011 alone young start-ups are being overcharged by £475m.

“The results of this research are simply shocking, says Saurav Chopra, CEO of Huddlebuy. "Small business fighting desperately to survive in harsh economic times are being ripped off by greedy suppliers, whilst big businesses enjoy huge savings from their favoured suppliers,”
 
Huddlebuy found that a firm with four employees will spend on average £12,124 per year supporting each individual. Buying online would reduce that cost by an estimated £1,937. The power of collective purchasing online, Huddlebuy’s research showed, could save a company with four employees nearly ten per cent of revenue currently spent on technology, telecoms, office supplies, accountancy services and business entertainment.

Key points from the research include:
Businesses with less than ten employees across a range of crucial industries are being overcharged by £3.6bn a year.

On average these small businesses are spending £1,285 more than they should be each year (with some businesses having to spend £4,000 too much).

These small businesses are the lifeblood of the UK economy, employing more than 4.5 million. Without the huge burden of higher costs, small businesses could employ an extra 138,000 people a year. *

Sole traders, freelancers and consultants are being overcharged £2.17bn, an average of £969 each per year.

The huge scale of overcharging threatens to derail the UK Government’s Start Up Britain initiatives.

Huddlebuy’s research showed that small businesses typically pay more than double what they should on a range of everyday services. In many cases they are missing out on discounts of 70 per cent and more.

Sector                                 Annual amount overcharged
Professional business services           £1.4bn
Information and communication         £306m
Motor vehicles                               £558m
Transport                                      £269m
Accommodation and food services      £170m
Construction                                  £830m
Property                                        £120m

Small businesses in the London and South East are particularly vulnerable being overcharged £1.3bn a year. Other regional rip-off hot-spots include the East of England (£390m) and the North West (£368m). Scottish businesses were overcharged by £222m.
 


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