Over half of UK businesses expect shadow spend to grow in the next year, triggering budget overspend and missed savings
London, UK, 22nd May, 2025. An average of one in every ten pounds spent by UK businesses is disappearing into a procurement black hole, as new data reveals a growing shadow spend challenge hidden from view. This challenge is costing UK PLC dearly, fuelling budget overspend (73%), compliance risks (57%), and missed savings opportunities (53%) at a time when every penny counts.
The study of 300 UK supply chain decision-makers by Ivalua, a global leader in spend management, reveals the problem runs deeper for many. 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 (80%) 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 toward cash flow protection or growth. These findings come after Government figures showed 23,872 registered companies became insolvent in 2024. Meanwhile, data from research firm Beauhurst also found that 198,046 businesses closed in the final three months of 2024.
“With £1 in every £10 lost to shadow spend, businesses are eroding margins and exposing themselves to risks without even realising it,” comments Stephen Carter, Product Director at Ivalua. “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.”
Technology can bridge 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,” concludes Carter. “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.”
About Ivalua
Ivalua is a leading provider of cloud-based, Spend Management software powered by AI agents. Our unified Source-to-Pay platform enables businesses to better manage all categories of spend and all suppliers, increasing profitability, improving sustainability, lowering risk and boosting employee productivity. We are trusted by hundreds of the world’s most admired brands and recognized as a leader by Gartner and other analysts. Learn more at www.ivalua.com. Follow us on LinkedIn.
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