Firms told to act now rather than wait for cutbacks
PRIVATE and family businesses in the Midlands should face up to the reality of the imminent cuts in public sector spending now instead of waiting for the axe to fall, PricewaterhouseCoopers has said.
For companies prepared to act now rather than later, there could be unexpected reward, the business adviser added.
It said the fall-out from the spending cuts was likely to be more far-reaching than many Midlands companies realised but by acting early and working together with their customers and suppliers it was possible to strengthen customer relationships and boost short-term profitability.
According to PwC, a significant number of private and family businesses in the Midlands are reliant, both directly and indirectly, on public sector contracts and for those affected, the proposed spending cuts pose a real threat to business continuity.
It said that while businesses are aware of the potential risks, many had yet to fully consider the impact of public sector spending cuts on their businesses and indirectly through their customers and suppliers.
Neil Philpott, private and family business expert at PwC in the Midlands, said: “The spending cuts are not just an issue for companies with public sector contracts – they will impact, either directly or indirectly, on virtually every Midlands’ company.
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“For private and family businesses the effects on the supply chain could pose real risks by causing breaks in supply or putting pressure on cash flow, so it is important for all businesses to plan ahead.”
He said companies should start by assessing how the forthcoming public sector spending cuts were likely to affect their business and open a dialogue with customers and suppliers at an early stage. In the case of any existing public sector contracts, companies should ensure they fully understood the terms and discuss with their customer ways to improve efficiency and maintain effectiveness.
In doing so, there would be an opportunity to strengthen customer relationships and position the business as a favoured supplier, added Mr Philpott.
“We are finding that companies that initiate discussions with their public sector customers and seek to work together at an early stage, stand to benefit,” he said.
“Not only are they viewed as positive supply partners, which could work in their favour when cuts are being implemented further down the line, there is sometimes an opportunity to renegotiate contracted services in a way that makes them more flexible and short term, whilst also improving profitability.”
According to PwC, some industry sectors have already demonstrated that real value can be created by businesses working more collaboratively with their suppliers and customers. The automotive and food manufacturing industries in particular have sophisticated supply chains that are resilient to economic, regulatory and other industry issues.
