The Reducer annual business spending and supplier review published this week, shows that low rates of switching will result in UK businesses missing out on £7.6Bn of savings in 2021.
Our analysis demonstrates that SMEs could make significant savings on their core expenses such as card payment processing, electricity and gas. Businesses that purchase services in all eight areas covered by Reducer, could save an average of £4,922 a year by switching suppliers. Across all UK businesses this amounts to £7.6Bn of potential savings.
Unlike studies that use surveys to ask companies about their spending habits, we had access to the accounting data of over 5,000 businesses. “Our spending report provides an unparalleled level of accuracy and detail, because we analysed the actual invoices of UK businesses.” said Reducer CEO, Joe Gallard.
The scale of the results were no surprise to Gallard, who wrote “UK businesses who don’t shop around consistently pay the highest prices. Comparing prices can take just a few minutes and save a business thousands.”
The most productive area for reducing costs was card payment processing, with potential savings of £2.4Bn. Businesses taking card payments could save £1,427 a year on average. There are known issues with pricing in the market, resulting in an ongoing investigation by the payments service regulator.
“The rate at which businesses take payments by card is increasing fast due to Covid, and so are the fees they pay to their terminal providers. Businesses who haven’t compared pricing in the last year can likely save.” said Gallard.
We found that UK businesses could save £1.9B a year in total by switching their energy provider. Our energy price analysis showed that businesses who are out of contract pay one third more than those that are in contract.
Despite the huge energy savings available, the impact of Coronavirus has prevented many businesses from accessing them. Nigel Tapper from Arcade Kitchens in Ilkley was blocked from switching to two different energy providers. “We’ve always had a good credit rating, but energy suppliers just don’t want to take on new customers at the moment, they see it as risky. It’s frustrating because we couldn’t move to a lower cost supplier”.
SMEs could also be saving over £1B in business telecoms and broadband. BT dominates the business landline industry, capturing more than 50% of the market, and 8 times the number of customers as their nearest rival, Virgin. This week BT customers announced a class action lawsuit to pursue compensation for historic overcharging.
UK businesses could be saving £130M a year by switching water suppliers. Many SMEs are unaware that they have been able to choose their supplier since 2017. New entrants in the market such as Water Plus and Everflow are combining higher levels of customer service with lower prices compared to the traditional providers.
A lack of switching in other business markets means there are potential annual savings of almost £1B in mobile phone contracts, £561M in waste collection and £708M by using fuel cards.