Accountancy firm BDO has warned small business owners that cost-cutting measures to reduce staff overheads have increased the risk of companies being drawn into litigation.

Research by BDO has revealed that 50% of firms have sought to reduce their costs by increasing their use of subcontractors and freelancers and outsourcing activities such as support services or relocating facilities.

"The speed and extent of the recession has forced many to make tough choices and to find innovative ways to cut costs and manage their business," said Gervase MacGregor of BDO.

"It is evident from some of the disputes that we have been instructed upon that businesses often expose themselves to enormous commercial risks which can result in disputes and litigation."