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An independent advisory body for SMEs has said that running a business from home can provide significant cost savings.

The National Federation of Enterprise Agencies (NFEA) has said that developments in the internet have released some of the financial strain business owners face in getting their companies off the ground.

Statistics by Flexibility found that the number of employees working from home had risen by 11 per cent in 2005.

NFEA chief executive George Derbyshire said: ‘The NFEA network of enterprise agencies is now seeing a larger number of new business start-ups operating their businesses without the use of a traditional office.’

He added: ‘Of course, many of today’s business operations can be run with a mobile or by email.’

Mr Derbyshire said that as the businesses grow they may have to move to larger premises but that for the early stages it was an economically sensible decision for SMEs to make.

However, he added that it was still important to run a professional operation.

Online competition between SMEs is hotting up, it has been revealed.

Research conducted by Cranfield School of Management suggests that the internet has bestowed one great advantage - it is now easier to enter the marketplace.

However, this means that competition is now more rigorous than before, with 46 per cent of SME owners saying that running a business is more complicated as a result.

Having said this, heightened competition means that SMEs are now more adept than ever.

“There is no question that the internet has enhanced the performance of SMEs,” commented Professor Andrew Burke, head of the Cranfield School of Management.

“The sting in the tail is that the uptake in internet use by SMEs has been so dramatic that most now share these same benefits and so few can garner a competitive advantage as a result.”

Foreign as well as domestic competition is to blame, with 62 per cent of the 422 SMEs polled saying that competition from foreign traders had increased.