Survey reveals losing public sector contracts could affect vulnerable sectors
Today (Wed Oct 20) George Osborne will explain how the government hopes to reduce public spending and it is expected the Comprehensive Spending Review will have a significant impact on the many businesses which rely on public sector contracts.
Research carried out by R3, the Association of Business Recovery Professionals, shows that as many as 148,000 SMEs fear they could face insolvency if the review is as far reaching as predicted.
14 per cent of the small companies surveyed would consider making redundancies and 24 per cent believe their profits would be reduced if public sector contracts were lost.
Sectors such as manufacturing, construction and business services which were hit hard by the recession, and which are only now showing signs of recovery, are expected to face the stiffest challenge.
With uncertainty over the future of public sector spending, it is vital for all firms to be aware of the knock on effect this may have on the businesses with which they trade.
Martin Walmsley, head of debtor insurance at Lloyds TSB Commercial Finance, said: “Although the figures from R3 illustrate a worst case scenario, the impact of the spending review poses a real challenge for many SMEs. Firms which are concerned should seek professional advice and try to minimise their exposure to potential risk.
“It is also sensible for management teams to consider taking out a credit insurance product such as our Debtor Insurance which safeguards a business against late payment and debtor insolvency.
"We have already received a significant volume of claims relating to the failure of Connaught - thought to be one of the first to suffer from spending cuts".