Small companies looking to win contracts ahead of bigger competitors should outsource all non-critical aspects of their operation, according to the British Chambers of Commerce (BCC).

A survey of private sector businesses by BT Business and Cisco revealed that over half (52%) of thought small companies were less competitive than larger ones, with 57% saying they could not offer round-the-clock support and 52% stating they were less likely to offer competitive rates.

As such, 40% of the procurement managers polled said they were less likely to choose a small business when times were tough and 42% said they would select a larger company over a smaller one given the choice.

"These findings are extremely worrying for UK businesses and especially start-ups," said John Dunsmure, managing director of the BCC.

"As such I would urge businesses to outsource anything that is secondary to their core business competence and invest their precious resources in what will help set them apart from the competition."

Forty per cent of those questioned admitted that what a supplier chose to outsource was a key factor in their decision-making. Only over a quarter (26%) claimed they would prefer to work with a company that did everything in-house, while one in four said they would be concerned if a supplier outsourced its customer service.

There was more positive news for small businesses, though. The majority of procurement managers (72%) said small firms were better placed to offer a more personalised service with customer service and responsiveness also in the top five reasons to use a smaller supplier.

The average amount of money such procurement managers had to spend each year was £28m, and 23% - or £6.6m - of this was expected to be spent with smaller businesses.

But 48% have either already increased their payment period or are considering doing so as a result, meaning small firms that do win contracts could have to wait some time to be paid.

This is despite the fact that nearly a quarter (24%) admitted they had a responsibility to consider the impact such a policy would have on companies that may struggle to cover their initial costs.