By Richard Smith, Head of Risk Management, RSM Tenon
One in nine business owners in the private sector believes that the single biggest threat to their business over the next 12 months will be from cuts to public sector spending, according to a survey of more than 300 entrepreneurs.
The research, carried out by RSM Tenon, the seventh largest accountancy firm in the UK, reinforces concerns that a reduction in spending within the public sector will have a domino effect on firms in many parts of the private sector. The survey was conducted to coincide with the start of the CIPFA Conference on 8 June 2010, which will focus on the impact on public services as the coalition Government announces its first £6.2 billion of spending cuts and a wave of public sector reforms.
RSM Tenon has identified businesses it believes rely heavily on revenues from the public sector and that are most likely to be affected:
Maintenance and repairs (including plumbers, cleaners,
painters and decorators)
Back office support
Printing & Stationary
Building and construction
Consultancies especially marketing and strategy consultants
Training & development
IT - equipment, leasing and consulting
A number of these sectors have already been hit hard by the economic downturn and may struggle to absorb further blows to their businesses. Across the regions 17% of the businessmen questioned in Yorkshire and the North, felt that cuts to public sector spending was the biggest threat to their business, topped only by Scotland at 19%. Just 7% of entrepreneurs in the South and 10% in the Midlands thought it to be their biggest concern.
The Conference, run by the Chartered Institute of Public Finance and Accountants, is being held between 8-10 June 2010 in Harrogate. RSM Tenon is a major provider of internal audit, IT, risk management and advisory services to the public and not for profit sectors with a team of more than 400 specialist staff throughout the UK.
Thus far the majority of attention has focused on how these cuts will impact on the public sector both in terms of service delivery and staff. However, the cuts will also deliver a potentially fatal blow to many businesses in the private sector where a plethora of businesses, reliant on providing support services to the public sector, will find that the government’s proposed measures will mean the end of the road for their business. To continue the metaphor, Entrepreneurs who entered this recession without a full tank of petrol will find themselves running on empty before the end of the journey through the recession. It is therefore vital we find ways to help secure those who create wealth and employment.
In terms of the public sector itself, we hope that our experience in helping public bodies operate in an environment which has limited resources and requires demonstrable efficiency savings will enable us to help both the public and private sectors chart their way through these troubled waters in the months ahead.
Alison Scott, Assistant Director of CIPFA, said: "With the increase in partnership working between the public and private sectors, it is inevitable that cuts in public expenditure will also impact on those private sector companies that work heavily in the public services.”
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