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Small businesses overcharged £3.6 bn annually

21 September 2011

Small traders are forced to pay up to three times more than big business for goods and services - threatening their survival and hopes of an enterprise-led economic recovery

Small businesses are being overcharged by more than £3.6 billion for goods and services according to new research.

The research by UK-based B2B group buying website found that businesses with fewer than 10 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 exhaustive and detailed analysis of each company's resource requirements by size and industry based on their expert knowledge of small business cost lines and requirements.

A typical UK start-up faces an additional bill of £1,200 each year for each employee compared to 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. 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,” said Saurav Chopra, CEO of Huddlebuy.

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:

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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