The huge £6.4bn cost of bad business advice

The insurer said that professional advisers, such as accountants and property consultants, could be pursued for losses incurred as a result of substandard advice. The research reveals that advisory consultants have cost Britain’s small and micro businesses an average of £20,842 over the past year due to inadequate professional consultancy, with one in five losing between £50,000 and £100,000.

This adds up to £6.4bn lost by small businesses as a result of poor advice in the past 12 months.

IT consultants were identified as the professionals most likely to give damaging advice.

Four in ten businesses whose operations were affected by bad advice blamed their IT consultants. A third blamed poor advice on management issues, while another third said incompetent marketing consultancy damaged their business.

Nearly half of affected companies said they were forced to lay off staff because of poor professional advice, 39 per cent were forced to scale back or halt expansion plans, and a third needed to take out a loan to prop up their business.

More than a quarter said that the survival of their business was put in jeopardy.

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.”