Ivalua: Shadow Spend Swallowing Business Expenditure
Over half of UK businesses expect shadow spend to grow in the next year, triggering budget overspend and missed savings.
That's according to research from the cloud-based spend management software provider Ivalua, which found that, on average, one in every ten pounds spent by businesses in the UK is disappearing into a procurement black hole.
This is costing businesses dearly, fuelling budget overspend (73%), compliance risks (57%) and missed savings opportunities (53%) at a time when every penny counts.
The hidden procurement black hole
Examining 300 UK supply chain decision-makers, Ivalua has exposed a problem that runs deep.
The vast majority (87%) of UK businesses report that up to 25% of their total spend escapes procurement oversight, while 4% report it to be higher than 26%.
The primary driver of this is poor visibility, with four in five organisations saying a lack of visibility prevents them from effectively tracking spend, managing suppliers and securing the best pricing.
Shadow spend is a significant challenge because it quietly inflates costs, erodes margins and blocks the visibility needed to reallocate spend towards cash flow protection or growth.
Financial collapse looms
Ivalua's research follows the publication of UK Government figures, which showed 23,872 registered companies became insolvent in 2024.
Meanwhile, data from research firm Beauhurst revealed 198,046 businesses closed in the final three months of 2024.
Stephen Carter, Product Director at Ivalua, says: "With £1 in every £10 lost to shadow spend, businesses are eroding margins and exposing themselves to risks without even realising it.
"In a cost crunch climate driven by tariff uncertainty and geopolitical tensions, shadow spend becomes a drain on resources that is no longer sustainable and must be stopped. But getting to grips with shadow spend is impossible if organisations can't see it happening. Without greater visibility and control over spend management, businesses are flying blind and running out of room to react, leaving many UK businesses at risk of financial collapse."
Bridging the visibility gap
The vast majority of UK businesses (84%) believe AI can help identify shadow spend, with 43% confident it will do so to a large extent.
Beyond detection, AI is also expected to enhance the employee experience, simplifying tasks like navigating e-procurement portals, adhering to approved supplier lists, following purchase order workflows and complying with expense policies. This will reduce the temptation to buy outside procurement controls.
Automation and analytics are also seen as vital tools. More than four in five (86%) believe automation can support shadow spend reduction, with 30% saying it will have a significant impact.
Meanwhile, 95% of UK businesses believe spend analytics can better identify shadow spend.
"In today's volatile global landscape, managing purchasing has never been more complex and shadow spend thrives in chaos," adds Stephen.
"Shadow spend is the silent margin killer, hiding in fragmented systems and poor visibility. AI won't just expose this problem; it will address it at the source.
"For example, conversational AI interfaces will help employees to buy what they need without bypassing spending policies and controls. By improving the employee experience, technology makes it easier to do the right thing, because if you can't see where your money's going, you'll never control where it ends up."
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