Diversify to avoid cuts impact, says FSB chief
Many small businesses working in specialist sectors would be “severely impacted” if funding sources from the public sector were to disappear. That's according to Bruce Undy, the Federation of Small Businesses' (FSB) Warwickshire & Coventry regional chairman. He told Insider that he hoped firms which are affected by this month’s spending review would “diversify and explore other markets”.
He made the comments as research from insolvency body R3 revealed that almost ten per cent of the UK’s small businesses fear they could be pushed into insolvency if they lost public sector contracts.
About 148,000 small companies across the country said they were fearful for their futures. The research also revealed that one-third of small businesses described themselves as “reliant on contracts from the public sector”.
Twenty-four per cent of respondents said they would see their profit reduced if their public sector contracts were pulled, while 16 per cent (or 253,000 businesses) would be unable to fund expansion.
Matthew Hammond, the Midlands chairman of R3, said that the worst case scenario would have a “dramatic effect” on the current levels of corporate insolvency in the region.
Hammond said: “To put these figures into context, business failures ran to 26,000 for the whole of 2009.
“Despite the government’s strong message of frugality in Birmingham last week, it is highly unlikely that the majority of public sector contracts will be withdrawn and the figure of 150,000 business failures is at the extreme end of the scale. Yet, with the prevalence of small businesses in both the East and West Midlands and an increasing reliance on public sector contracts dating back to the 1990s, these cuts are likely to be felt extremely keenly.”
Bruce Undy said that by their nature, small businesses “often have the flexibility to adapt to economic changes”, and many should diversify and explore alternative markets.
He added: “As with most government changes, many of the cuts will take time to come to fruition, which will allow small businesses time to consider alternative sources of income.”
He urged the public sector “to consider the impact that removing contracts will have on the private sector” and cautioned government to “take the necessary steps to make it a painless as possible for those small businesses affected”.
