Nine months on from the comprehensive spending review,
entrepreneurs consider public sector cuts to be the largest threat
their businesses face, according RSM Tenon in the West
Midlands.
RSM Tenon's Business Barometer, a quarterly survey of senior
management in small and medium sized enterprises, found that 18 per
cent of entrepreneurs nationwide view the slash in government
spending to be the greatest danger to their company. This figure is
significantly higher than 12 months ago, when just 13 per cent
cited public sector cuts as the biggest threat, while both lack of
cash flow and failure of government to address national debt were
considered more pressing issues (with 22 per cent and 20 per cent
citing these respectively).
In the West Midlands, 16 per cent cited public sector cuts as
the greatest threat their businesses faced.
Bev Marsh, director at RSM Tenon's Birmingham corporate recovery
office, said: "These figures highlight how the ripples created by
the comprehensive spending review are beginning to reach all parts
of the UK's economy. Directly or indirectly, public sector cuts
affect almost everybody - partly because many firms who supply
publicly-funded bodies are losing contracts, and partly because
redundancies in the public sector create uncertainty which has a
dampening effect on overall consumer confidence.
"I am currently working with a company which has gone into
liquidation when turnover was halved when it lost a large number of
public sector contracts. Many SMEs simply cannot react quickly
enough when they lose a large amount of turnover so rapidly. Nor do
they have the size or cash reserves to support the major
cost-cutting initiatives that many blue chip corporations can
struggle though, so they are less equipped to deal with shocks such
as the comprehensive spending review."
Nationally, the survey shows a mixed scorecard for the
government. The proportion of entrepreneurs worried about the UK's
national debt has dropped to 13%; although twice as many
respondents worry about legislation increasing their administrative
burden compared to the same point in 2010 (13 per cent and 6 per
cent respectively).