By Jonathan London on 17th August 2015

Poor advice ‘can cost small businesses dearly’

A new report has demonstrated the significant financial impact that poor professional advice from third parties or consultants can have on UK small and micro businesses.

New research published by Direct Line for Business has indicated that one in six British small and micro businesses have lost money as a result of receiving bad advice, leading to an average loss of £20,842 in the past 12 months.

Moreover, 19 per cent claimed to have lost between £50,000 and £100,000 due to this problem, equating to a total loss of £6.4 billion among smaller businesses over the last year. It is estimated that as many as 320,000 companies could have been affected by this problem.

IT consultants were shown to be the most likely to provide bad advice, with 44 per cent of companies who had been poorly advised blaming professionals from this sector. A further 34 per cent said management advisers had led them astray, while 32 per cent pointed the finger at marketing consultancies.

The report also shed light on the potentially significant impact these mistakes can have, with 46 per cent of affected companies saying they were forced to lay off staff because of poor professional advice.

Additionally, 39 per cent had to scale back or halt their expansion plans, with 34 per cent needing to take out a loan to stay solvent and 28 per cent feeling the survival of their business had been put in jeopardy.

Nick Breton, head of Direct Line for Business, said: “Our research clearly highlights the devastating effect poor professional advice can have on small and micro businesses.

“However, the impact on an advisory firm that is facing litigation can be just as shattering. For those providing advisory services, it is important to recognise that issues can occur and clients could pursue them for compensation.”

Jonathan London Written by Jonathan London

Was this article helpful?

Yes
No

Disclaimer
Although we attempt to ensure that the Information contained in this publication is accurate and up-to-date at the date of publication it may not be comprehensive, we accept no liability for the results of any action taken on the basis of the information they contain and any implied warranties, including but not limited to the implied warranties of satisfactory quality, fitness for a particular purpose, non-infringement and accuracy are excluded to the extent that they may be excluded as a matter of law.

Share this blog

View our latest blogs

Take a look at our recent blogs below.

We’re here to help

Discuss your business and accountancy
needs in detail with our friendly team with
absolutely no obligation.

Call our friendly team on 0808 168 0422 or

Request a call back

(Open 8.30am to 5.30pm Monday to Friday)

Emily Ewin New Client Manager
Emily Ewin New Client Manager