Accountants warn that central and local government buyers are coming under pressure to re-examine existing contracts as well as curtail plans for future spending.
Clive Lewis, head of enterprise at the Institute of Chartered Accountants in England & Wales, said: “I know from contacts with civil servants that they have been in a cuts mentality since before the election.
They have been doing exercises that suggest cuts of anything between 5pc and 25pc of budgets. And I know of businesses that are already seeing a severe cut back from the amount of work they are getting from government.”
He added: “A lot of their expenditure is already contracted. A lot of savings will be telling people with contracts let’s see where the give is.”
He said that some companies were agreeing to a lower price in return for security of business. “You have to ask do you accept it and cut back your level of activity to compensate or keep that capacity and look for some private sector work to do. It’s a decision that every business will have to take.
“Businesses that have become over focused on the public sector are looking around for alternative work and they look at work in the private sector that’s already been produced and they offer the service at a reduced price.”
The institute suggests the following:
- Be on top of contract terms and end dates
- Keep in touch with your contacts and find out if they face cuts and when
- Model scenarios where you lose a percentage of your sales – how much can you afford?
- Consider whether you are prepared to renegotiate contacts – what would you look for in return