The cuts are hitting business confidence and turnover
Yesterday’s Times (£) reports on concerning new survey evidence from the Institute of Chartered Accountants: 20 per cent of employers they surveyed reported that spending cuts have already affected their turnover and 45 per cent believe that turnover will face negative impacts from cuts over the next 12 months. As a result of these fears 47 per cent of those reporting turnover reductions have already reduced staff. The Chief Executive of the ICAEW, Michael Izza, said:
What has been forgotten, though, is the extent to which the private sector is a supplier to the public sector. Whether it is services, materials or equipment firms of all sizes and from all sectors have had work either directly or indirectly from Government organisations…These relationships are either under threat or have already been terminated.
The affects of cuts for the private sector may be an impact that the Government and much of the business lobby is conveniently forgetting to mention, but it’s not an issue that the TUC has been unaware of.
Last September, we highlighted that 38p in the pound of public spending goes directly to private sector firms – and with 25p of spending going on pay it will also be private business who suffer as public servants face wage freezes and real terms pay cuts. Government may choose to believe that the scale and speed of its spending reduction programme can be offset by private sector job creation, but the evidence suggests that both public and private sector organisations are set to feel the pain over 2011.