Small Businesses: Prepare for Public Sector Cuts

Companies who have contracts with the public sector are being urged to prepare for possible cuts by the ICAEW. With £6.2bn of spending reductions recently announced and further cuts expected in the forthcoming Budget and Spending Review, businesses need to be clear about their next steps, if the worse happens.

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 has called on businesses to review their current situation by:

  • Checking when the contract is due to end. What are the penalties for either side if the contract is terminated or finishes early?
  • Speak to your contact in the contractor. Do they know if they are likely to face a reduction in budgets and if so, when?
  • Do you need to rethink your business plan? Is there too much focus on public sector contracts and not enough private contacts?
  • Can you re-negotiate the contract? Are you prepared to take less money? What might you get in return?
  • Can you diversify in terms of what you can offer local government?
  • Are the services you provide value for money? If you have cut costs, can these savings be passed on?
  • If you do lose a contract don’t forget to ask for feedback from the client.
  • Is it worth looking at other areas of the public sector? Don’t forget to check

Clive adds:

“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. For businesses that have made it through the recession there are still tough times ahead.”

Further information can be found at A guide to help businesses manage and succeed through the upturn is also available from

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