Slashed budgets will mean reduction in private contracts

A reduction in government budgets will inevitably lead to a cut in public sector contracts for businesses, firms have been warned.

Businesses whose income relies heavily on public sector deals are now being warned to review their business plans.

Accountancy group the ICAEW said that with £6.2bn of spending reductions already announced, and more expected in the emergency Budget later this month, businesses should be planning for a possible dip in income.

Clive Lewis, head of enterprise at the ICAEW said: “For businesses that have made it through the recession there are still tough times ahead.”

Lewis said although the cuts were inevitable and businesses would have to accept them, actions could be taken to “soften the blow”.

He added: “Some sectors are going to be harder hit than others, such as construction. They key is to be flexible and not to panic if cuts affect your business.”

The ICAEW said business with public sector contracts should check their paperwork carefully to ensure they are clued up on any penalties for early termination.

The group also advised businesses to rethink their business plans if they rely too heavily on public sector work to see if greater emphasis on private sector contracts, or less affected parts of the public sector, is possible.

Businesses can view all public sector contracts up for tender by visiting www.supply2gov.co.uk

© Crimson Business Ltd. 2010