Public sector cuts already hitting Midland SMEs

PUBLIC sector funding cuts are already taking their toll on Midlands SMEs, insolvency specialists have said.

Insolvency and corporate recovery firm Poppleton & Appleby said it had seen a rise in the number of businesses seeking advice after seeing trade hit by the Government cuts.

Martin Coyne, partner at the Birmingham firm, said he believed the trend would continue until the results of the Government Spending Review were announced by Chancellor George Osborne next month.

He said: “In the last week alone we have been approached by three companies who have all suffered considerable loss of trade directly because of Government cut backs.

“Two have fallen victim to the decision to cut back on the schools improvement programme both on a national level with the cancellation of the Building Schools for the Future initiative and council improvements to schools on a local level.

“The other firm supplies services into public bodies in Birmingham and has found that demand has literally been turned off like a tap and it has hit it very hard indeed.”

He said it was very difficult to predict what would happen after the spending review and while there was unlikely to be any loosening of the reins, there is a feeling that local authorities have just put the brakes on all spending because they feared the worst.

“It might be then that decisions are taken more strategically, rather than it being just an instinctive drawing in of horns,” he added.

Poppleton & Appleby warned just two months ago that SMEs would feel the full impact of cut backs in the third and fourth quarters of the year.

The Insolvency Service reported last month there were 4,080 compulsory liquidations and creditors’ voluntary liquidations in England and Wales in the second quarter of 2010, which was an increase of 0.5% on the previous quarter but a decrease of 19.1% on the same period a year ago.