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Connaught collapse blamed on government spending cuts

The impending administration of the FTSE 250 social housing company, Connaught PLC, is widely reported today. This tangible illustration of the effect government spending cuts can have on industry poses questions about the future of the UK economy. There will be a knock-on effect as the company's customers, suppliers and sub-contractors, its 10,000 strong workforce and the social housing sector as a whole will be hit.

There may be additional reasons for Connaught's failure, but what other companies (along with their suppliers and sub-contractors) are going to suffer because of government spending cuts? According to The Guardian:

 "the schools IT company RM Group has recently said that contracts worth £200m are at risk, while the construction firm Balfour Beatty and telecoms group Cable & Wireless Worldwide have also warned about the impact of spending cuts".

Companies large and small should by now have taken steps to identify exactly how reliant their business is on public spending – both directly and indirectly. They have to find alternative revenue streams to replace deferred or cancelled government contracts, and must manage their own costs if they are to avoid failure themselves. 

Directors and business owners worried about this or other financial stress need to act early, discuss the problems with the company’s funders and seek professional advice on restructuring the operations, revenues, costs and/or balance sheet of the business in order to stand the best chance of continuing trading through any possible double dip recession. 

 

 

Date: 8th September, 2010
Author: Chris Laughton

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