Spending Review will hit Small-business Suppliers Hardest

Small firms that supply the public sector will be hardest hit by the Comprehensive Spending Review’s cuts, as local authority funds from central government will be reduced by almost a third, the British Chambers of Commerce (BCC) has warned.

Chancellor George Osborne announced an £81 billion programme of public sector spending cuts over four years – including 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 a lot of small firms are dependent on local authority contracts and will be hard hit by the cuts.

“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.”

However, he added that there was a silver lining as some departments would 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 said that the spending review was “better than expected for small firms”, highlighting the Chancellor’s announcements such as investment in apprenticeships, infrastructure and superfast broadband.

“About 70 per cent of apprenticeships take place in small businesses and this funding will enable small firms to take on more apprentices.”

said Federation of Small Businesses (FSB) spokeswoman, Prue Watson.

“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) welcomed measures to reduce public spending quickly, but questioned 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 affecting small businesses announced in the Comprehensive Spending Review are:

  • The Department for Business, Innovation and Skills to cut spending by 7 per cent a year
  • End to ring-fencing of local authority grants from April 2011
  • HM Treasury to make £900 million available to tackle tax evasion and avoidance
  • Pension age to rise to 66 by 2020, four years sooner than planned by the Labour government
  • Increase in funding for adult apprenticeships by £250 million a year by 2014-15
  • Superfast broadband pilot projects to be launched in the Highlands and Islands, North Yorkshire, Cumbria and Herefordshire
  • Investment in the low-carbon economy, including the creation of a Green Investment Bank

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