Another knock-on effect of drastic government spending cuts hitting businesses hard. The most affected are companies that goods or services to the public sector. Research has revealed that 168 companies in the health and social services, education and defence sectors went into liquidation during the first half of 2010. This is an increase of 47% for the same time last year when the same happened to 114 companies. Corporate insolvencies however have decreased by 5%.
These companies have been forced into insolvency due to approval of contracts being delayed and government spending plans being undecided as well as other reasons. Businesses that are in the most danger of insolvency are care homes, recruitment agencies, outsourcing, construction and marketing services. Many companies are finding it extremely difficult to find ways of cutting costs after increasing their fixed costs in recent years.
Anthony Cork, director at Wilkins Kennedy said: ‘The public sector has seen tremendous growth over the past 15 years and the private sector ecosystem that surrounds it has expanded along with it. Supplying to the public sector has been seen as safe and steady; unfortunately that is no longer the case.’
Unfortunately the situation is likely to worsen after the public spending review in October.