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December 14, 2012

Pain-free cost-cutting could save SMEs billions

Small businesses could save themselves nearly £16.5 billion a year by taking simple steps to cut costs, without impacting on service or staff, according to new research for Clydesdale and Yorkshire Banks, conducted by Opinium Research.

Nearly one in seven SMEs admitted to never regularly reviewing the costs for their largest areas of expenditure, according to the research.

Despite rising fuel and energy costs, more than half of all SMEs admitted to reviewing their day-to-day costs only once a year. Lack of time and misplaced loyalty to their current suppliers were cited as the main reasons for this inertia.

Electricity and gas prices have risen by 69% and 87% respectively since 2005, and the Government predicts prices will rise a further 26% by 2020 compared to today's prices. The average price of motor fuel has risen 44% in the past seven years.

More than 40% of businesses said that, excluding salaries, materials and supplies represented the most significant cost for them last year. Fuel, IT, rent and energy bills were also significant and, together with materials, represented around nearly half of all SME expenditure.

According to the research, last year, those SMEs that reviewed their regular costs saved, on average, £11,385, by adopting straightforward measures such as implementing energy-saving policies or moving to paperless systems.

Paul Shephard, director for business and private banking at Clydesdale and Yorkshire Banks, said: "Regularly reviewing costs should be top of the to-do list for any SME owner or manager. Even relatively simple measures, such as making sure computers are switched off at night rather than left on standby, go towards bringing costs down."

He added: "Our research shows that there are significant savings to be made without a huge amount of effort. And all of these savings avoid cutting quality, service or wage bills, leaving money to be invested back in to the business, which in some cases is going to be tens of thousands of pounds."