Poor advice 'creating major costs for UK small businesses'

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Poor advice 'creating major costs for UK small businesses'

Small businesses across the UK are counting the costs associated with poor professional advice, a new report has shown.

A report carried out by Direct Line for Business has indicated that bad advice from third-parties or consultants has resulted in 16 per cent of the country's small and micro businesses losing money.

This is the equivalent of 32,000 enterprises nationwide that have lost out financially due to advisory consultants and other such firms providing substandard guidance, with small and micro businesses looking at an estimated average of £20,842 in the past 12 months due to inadequate professional consultancy.

Moreover, 19 per cent of firms claim to have lost between £50,000 and £100,000 as a result of this problem, with the estimated cumulative total of these losses coming to around £6.4 billion over the last year.

It was shown that 44 per cent of businesses whose operations were affected by bad advice blamed their IT consultants, making them the most common scapegoats, while 34 per cent reported receiving bad advice from management consultants and 32 per cent from marketing professionals.

Other small business owners said they had lost money because of faulty advice from property consultants, comms advisers, accountants, advertising agencies and legal counsels.

The impact of such losses can be extremely serious. Indeed, 46 per cent of affected companies say they were forced to lay off staff because of poor professional advice, while 39 per cent had to scale back or halt expansion plans, 34 per cent required an emergency loan and 28 per cent found the survival of their business was put at risk.

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."