By Claire West

Commenting on the impact of today’s spending cuts on the private sector, Glen Babcock, Advisory partner at PwC, commented:

“As we predicted, these cuts will present tough challenges for the private sector. Those who will suffer most will be the small businesses that rely on public sector contracts as their key revenue source, but the impacts will be felt by all businesses as they prepare for a tougher climate for public procurement. There will now be even more sensitivity on new projects and yet more pressure to renegotiate existing contracts. Therefore, it is key that businesses continue to look at their forecasts and communicate with their key stakeholders as we await the detail from the individual government department business plans in November.

“On the positive side, this review offers opportunities for private sector companies to work with the public sector in new and innovative ways. This is the chance for the private sector to share its wealth of experience and skills in back office rationalisation and outsourcing to help the public sector achieve savings and improve services.”

Impact on private sector jobs

As predicted in the PwC report ‘Sectoral and regional impact of the fiscal squeeze’ released last week, almost half a million private sector jobs could be lost as a result of the cuts, although this could be mitigated by increased labour market flexibility on wages and hours worked. Although recovery from this recession may not be as strong as previous ones, we would expect at least some increase in private sector employment over the next five years despite the fiscal squeeze