Poor advice results in £6.4 billion loss for UK enterprises tablet device with pie chart

Poor advice results in £6.4 billion loss for UK enterprises

Direct Line for Business shows the importance of professional indemnity cover as one in six small businesses lose money due to poor professional advice.

  • Poor professional advice from third parties or consultants has resulted in 320,000 enterprises losing money
  • Estimated average loss of £20,842 to Britain’s small and micro businesses  because of poor advisers and consultants
  • The greatest issue has been caused by deficient IT consultancy advice

London, 13 August, 2015 Poor professional advice from third parties or consultants has resulted in one in six (16 per cent) small and micro businesses (the equivalent of around 320,000 enterprises1) losing money, according to new research2 published by Direct Line for Business.

Professional advisers, such as accountants and property consultants, are warned that they could be pursued for losses incurred as a result of giving substandard advice. The research reveals that advisory consultants and other such firms have cost Britain’s small and micro businesses an estimated average of £20,842 in the past 12 months due to inadequate professional consultancy, with one in five (19 per cent) claiming to have lost between £50,000 and £100,000. In total this would equate to a whopping £6.4 billion lost by small and micro businesses as a result of poor advice in the past 12 months.3

IT consultants were identified as the professionals most likely to give damaging advice. Four in ten (44 per cent) businesses whose operations were affected by bad advice blamed their IT consultants. A third (34 per cent) of businesses suggested it was poor advice on management issues, while 32 per cent claimed incompetent marketing consultancy negatively impacted their business.

Advisory sectors that most negatively impact businesses

1 IT consultancy 44%


Management advice



Marketing consultancy



Property consultancy



Communications consultancy






Advertising consultancy



Legal advice


Direct Line for Business warns that not only should consultants providing advisory services consider the reputational and financial impact of poor advice to their own company, but also a number of unintended effects on the businesses to which they provide advice. Nearly half (46 per cent) of affected companies suggested they were forced to lay off staff because of poor professional advice. While 39 per cent were forced to scale back or halt expansion plans, a third (34 per cent) needed to take out a loan to prop up their business. More than a quarter (28 per cent) highlighted that the survival of their business was put in jeopardy.

How poor professional advice affected small and micro businesses?


Forced to lay off employees



Forced to scale back or halt expansion plans



Forced to take out credit



Put business survival in jeopardy



Forced to resolve client/customer issues



Lost clients



Forced to sell company assets





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”.

“Advisory firms can protect themselves in case an issue does arise from the advice they give by taking out professional indemnity insurance.”

For more information on professional indemnity insurance and how to protect yourself from legal costs and compensation in cases of negligent advice, visit professional indemnity insurance.

Notes to editors

1 Total estimates based on 2.26m small enterprises in the UK, as recorded by the ONS

2 Research conducted online by Consumer Intelligence among a representative sample of 125 UK SMEs

3 Research conducted by Atomik Research in June 2015 amongst a representative sample of 177 UK small and micro businesses (up to 10 employees).

Professional Indemnity insurance is available from Direct Line for Business and provides covers against Breach of confidentiality, data protection, libel or slander, data protection, defence costs & intellectual property rights.

For further information please contact:

Citigate Dewe Rogerson
Amrit Nijjer
Tel: 020 7282 2803
Email: amrit.nijjer@citigatedr.co.uk

Direct Line Group
Simon Henrick
Head of News and Issues
Tel: 0208 313 5965
Mobile: 07833 166 717
Email: simon.henrick@directlinegroup.co.uk

Direct Line for Business

Launched in 2007 Direct Line for Business provides a range of insurance products for the small business sector direct by phone or on-line.

Direct Line for Business Professional Indemnity insurance is underwritten by HCC.

All other Direct Line insurance policies are underwritten by U K Insurance Limited, Registered office: The Wharf, Neville Street, Leeds LS1 4AZ. Registered in England and Wales No 1179980. U K Insurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, registration number 202810. The Financial Services Register can be accessed through www.fca.org.uk. Calls may be recorded.

Direct Line for Business and U K Insurance limited are both part of Direct Line Insurance Group plc.

Customers can find out more about Direct Line for Business products or get a quote by calling 0345 301 4827 or visiting www.directlineforbusiness.co.uk

Small Business Insurance Press Release

Last Updated: 15th March 2018