Businesses should be ‘ready’ for spending cuts
Firms that have public sector contracts should plan ahead in case they are affected by the swathe of cuts that are likely to be introduced over the coming months.
The warning has come from the Institute of Chartered Accountants in England and Wales (ICAEW).
Some £6 billion of cuts have already been announced, and the emergency Budget and the autumn spending review will almost certainly herald more.
Both central and local government departments will be under increased pressure not just to assess current contracts but also to revise future spending levels.
Clive Lewis, head of enterprise at the ICAEW, said: “These cuts are inevitable and businesses will have to accept them. There are actions that can be taken though which can soften the blow and ensure that it will not mean that a company will go out of business.
“It is clear that there are some deep seated problems to address in the UK’s public finances and it is best to be prepared for this eventuality.”
The ICAEW offered firms with government contracts some forward-planning advice.
They should check the end dates for any contracts and investigate what penalties might be incurred if a contract is terminated early.
They should get in touch with their contacts on the contract and find out if they expect cuts and when. Re-negotiating an existing contract may be an option that can be explored.
Examining whether firms provide good value for money could also be useful. Cutting costs could be a way of helping to pass on savings.
Firms should also revisit their business plans, perhaps to address the balance between the public and private sector contracts they hold.
Mr Lewis added: “The key is to be flexible and not to panic if cuts affect your business. For businesses that have made it through the recession there are still tough times ahead.”