Public sector cuts could trigger surge in number of businesses going under

Cutbacks in public sector spending could trigger a surge in the number of businesses going under experts are warning.

In the Emergency budget in May the government announced plans to slash more than £6 billion from public sector spending, with only health, defence and international aid protected from the cuts.

Research by commercial credit reference agency Graydon shows that four out of five credit managers believe these cuts will lead to a sharp increase in business insolvencies within the next 12 months.

Nearly two thirds of those questioned expect business failure rates to rise by more than ten per cent in the coming months, with 13 per cent predicting a rise in business insolvencies of more than 20 per cent, as the number of public sector contracts available to small businesses falls.

Despite fears of looming insolvencies just under half of credit managers agree that a rise in business failures would be a price worth paying in order to restore economic stability in the UK.

Graydon is urging small businesses to take measures to ensure they are protected where possible from the impact of fewer public sector contracts.

Martin Williams, managing director of Graydon UK, says: ‘Firms need to heed this warning now and ensure they are equipped to monitor exposure to public sector based revenues across the entire length of their supply chains. The failure of a key supplier or customer dependent on government contracts could inflict huge damage to business stability at very short notice.

Tags: Enterprise Zone, insolvencies, public sector cuts, small business, SMEs

Posted by Helen Loveless on Sunday, July 25th, 2010 at 6:23 am.

Filed under Data Bank, SMEs, Starting a Business, Tagged as: , Enterprise Zone, insolvencies, public sector cuts, small business, SMEs.