Spending review to hit small-business suppliers the hardest

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Small businesses that currently act as suppliers to the public sector will be the worst hit by the recent Comprehensive Spending Review’s planned cuts, as a result of local authority funds from central government will be dramatically reduced by up to a third, the British Chambers of Commerce (BCC) has announced.

The Chancellor George Osborne announced an £81 billion plan of public sector spending cuts over the next four years. This will include such measures as abolishing ring fencing of local authority grants, and cutting local government funding by approximately 30%.

British Chambers of Commerce (BCC) director of policy and external affairs, Adam Marshall, said that many small companies are dependent on local authority contracts and will very badly by the proposed cuts.

Mr Marshall said, “There is a high risk for businesses in public sector supply chains, which will see a number of contracts go — particularly those working with local authorities.”

Although, he did add that there was some good news amongst the bad, as some departments would have to outsource more work to cut costs.

“Small firms need to evaluate their exposure to the public sector and which contracts are vulnerable. Over the next three to six months the impact of the cuts will become clearer and firms should keep an eye out for new opportunities.”

Spending review “better than expected for small firms”

Business groups also claim that the spending review was “better than expected for small firms”, highlighting the Chancellor’s announcements with propositions such as investment in apprenticeships, infrastructure and super-fast broadband.

The Federation of Small Businesses (FSB) spokeswoman, Prue Watson said,  “About 70 per cent of apprenticeships take place in small businesses and this funding will enable small firms to take on more apprentices.”

“They have cut the Train to Gain scheme and we support this, as in-house training needs to be better recognised,” she added. “The broadband pilot funded by the Government and by the BBC licence fee is fantastic news for rural businesses, many of which currently don’t have any broadband or have low broadband speeds,” she added. “This will save them money, improve productivity and encourage more firms to start up.”

The Institute of Directors (IoD) has been positive about planned measures to decrease public spending quickly, but did question the investment in apprenticeships.

“The Government should be wary of introducing too much bias in the way it favours, funds and promotes apprenticeships — they are not a universal training solution and are not suitable for all types and sizes of organisation,” said IoD director general, Miles Templeman.

The key measures of the Comprehensive Spending Review that will affect small businesses are:

  • The Department for Business, Innovation and Skills cutting spending by 7 per cent a year.
  • There will be an end to the ‘ring-fencing; of local authority grants from April 2011
  • HM Treasury will make £900 million available to take a hard line on tax evasion and avoidance
  • The pension age will rise to 66 by 2020, four years sooner than planned by the previous  Labour government
  • There will be an increase in funding for adult apprenticeships by £250 million a year by 2014-15
  • Super-fast broadband pilot projects to be launched in the Highlands and Islands, North Yorkshire, Cumbria and Herefordshire
  • The investment in the low-carbon economy, including the creation of a Green Investment Bank

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