Public Sector Cuts Set to Disrupt Small Businesses

Nearly 150,000 small businesses face insolvency if their public sector contracts are cancelled, according to research carried out by R3.

The insolvency trade body revealed that over 148,000, nearly 10% of small businesses feared insolvency would result if they lost the work they carried out with the public sector.

It was also revealed that one third of small businesses described themselves as reliant on public sector contracts, which meant that government cuts could have a profoundly significant effect on current levels of corporate insolvency.

The president of R3, Steven Law said, “It is of course highly unlikely that all public sector contracts will be withdrawn and the figure of 150,000 business failures would represent a worst case scenario. 

“Yet with the prevalence of small businesses in the UK and an increasing reliance on public sector contracts dating back to 1990s, these cuts are likely to be felt extremely keenly.”

R3’s research found that of all small businesses, a fairly substantial 11% said they would face serious financial difficulty should they lose their public sector contracts, whilst as many as 24% said their profitability would be affected.

Furthermore, 14% of small businesses revealed that they would have to consider job losses if they lost their public sector contracts.

Law also said, “Worryingly these results suggest that a significant proportion of small businesses, which rely on government contracts, are going to struggle to fund expansion and modernise.

“This comes against a backdrop of corporate insolvency figures being kept down by HM Revenue and Customs time to pay agreements and historically low interest rates.”

Posted at 02:28PM Sep 13, 2010 by Marc Stenton in The Economy  |  Comments[0]