Business risk from public spending cuts

Connaught PLC's administration illustrated the risk to private sector business of public spending cuts (Connaught collapse blamed on government spending cuts). That risk is further highlighted in research, statistics and commentary from such diverse sources as R3 (The Association of Business Recovery Professionals), the TUC and Boris Johnson.

The key finding of R3's new research, based on telephone interviews with small business owners in August 2010, is that:

"One in ten or 150,000 small businesses say they are in danger of going into insolvency should their public sector contracts cease."

The Trades Union Congress forsees a big drop in business and consumer confidence:

"Analysis of public accounts shows that in 2008/9 . . . spending on the private sector (at £236 billion a year) took 38p of every £ raised in tax."

"the private sector will inevitably be hit" by the cuts outlined in HM Treasury's Spending Review.

Boris Johnson writes in The Telegraph:

"around about Christmas. . . businesses of all kinds [will] start to feel the chilling effects of cuts in public spending".

The 150,000 SMEs at risk of insolvency should certainly be taking early advice to avoid financial distress, but so too should the rest of the 500,000 SMEs that are reliant on public sector contracts (according to R3's research).

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