Small businesses borne in the noughties are likely to suffer greatly if they currently supply the public sector. Insolvency trade group, R3 have warned that newer firms who are reliant on public sector contracts are more at risk of failing when the country is coming out of recession.
R3 have based their statistics on companies with a turnover £50,000 to £1m although these companies are not necessarily IT specific. Their research was conducted amongst 301 firms which were started in the 90s or 2000s, with over 33% stating that their business relied primarily on those public sector contracts. These businesses are far more reliant on state contracts than firms which began in the 1980s or before. The research actually showed that 90% of firms are expecting to suffer a substantial hit when the public sector funding is cut. Overall, firms are expecting to see an effect on their profits if they lose their public sector contracts. Of course, this will also have an effect on their employees, with 14% considering job losses, which is to be expected, considering that 37% of those polled predicting that they will find themselves in serious financial difficulty.
R3 president Steven Law commented: “It is of course highly unlikely that all public sector contracts will be withdrawn and the figure of 150,000 business failures would represent a worst-case scenario. Yet…businesses need to be aware of this risk and seek professional advice before this reliance on public sector work threatens”