Tuesday, June 23, 2009

Is the public sector a major customer – be worried be very worried

Imagine you are in a boat that has just survived a horrendous storm.

Bits of rigging are broken, the galley is in a mess but you are all still alive. The sun is breaking through the clouds and you and crew give a collective shout of joy. You look over your shoulder and see on the horizon, what looks like a solid black line of clouds.

You look again and it appears to be rapidly approaching. You should be worried but you guess that if you survived one storm what more can go wrong. Big mistake. Big. Huge.

Two stories in yesterday’s press should send a shudder down the spines of all companies that get a significant amount of business from the public sector. That includes a lot of businesses that are dependant on local authority spending to provide services to older people.

Quote 1. PricewaterhouseCooper accountants said that whichever party wins the next election, there will have to be cuts of around 15% totalling a huge £22 billion. PWC’s John Hawksworth said: “Public spending cuts may need to be greater than either party is admitting. “If health is protected then other departmental spending would need to be cut by around 15% in real terms.

Quote2. More than half of UK jobs created in the business services sector during the past five years will be axed by 2011, a study suggests. About 334,000 jobs will be lost in the sector because of the credit crunch and recession, the Centre for Economics and Business Research (CEBR) said. Firms who worked for the public sector would suffer as spending by government bodies are tightened.

The UK has vast array of companies that owe their existence to the past decade of massive government spending. For a lot of these are quasi-marketing companies it is time to batten the hatches, look for new markets and pray. Dick Stroud

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