Better buying 'will increase profits by £53 billion'

26 October 2009

26 October 2009 | Jake Kanter

FTSE-350 companies could boost earnings by billions in 2010 by tackling third-party spend.

Procurement outsourcing firm buyingTeam calculated the amount based on information from global data provider FactSet.

The consultancy said the UK's top companies were experienced in making headcount reductions, but they were overlooking much larger potential cost savings in other areas.

Figures reveal FTSE firms' combined external spend reached £1,059.8 billion last year, while staffing costs were only £162.8 billion. By making a 5 per cent reduction in third-party spend, buyingTeam said the companies could boost earnings by a total of £53 billion next year.

Firms in the construction, chemicals and technology industries have the greatest scope to cut costs. The least efficient company in the construction and materials sector could enjoy a 140 per cent increase in earnings through a 5 per cent reduction in external spend, according to the findings. Some of the best performing companies included those in the mining and drinks industries.

Matthew Eatough, chief executive of buyingTeam, said: "Barely a day goes by without more promised public sector cuts from our politicians, so it's all the more remarkable that some of the UK's leading companies are missing the opportunity to drive margin growth through effective procurement.

"Procurement is so often overlooked as an effective tool when looking to recoup earnings. Indirect costs are a less visible part of the cost structure of many companies."

SMoct2009

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