Industry's future rests with spending review

Simon Nias
Wednesday, October 20, 2010

Depending on who you talk to, the government's Comprehensive Spending Review, due for publication this week, will either rescue or devastate the UK economy.

The debate – to cut, or not to cut – centres on the risk of tipping the economy back into recession, versus that of the international markets losing confidence in the UK and a full-blown Greek (or PIGS) tragedy ensuing.

The cuts will be most keenly felt by those businesses that are dependent on state funds; however, it is likely that all businesses will be impacted in one way or another.

There will doubtless be a knock-on effect in terms of a reduction in discretionary spend (including print) across the sectors that are themselves hurt most by the cuts, including construction, IT, recruitment, advertising and business services.

In its latest quarterly Red Flag Alert, Begbies Traynor has claimed that more than 50,000 companies across these sectors are at risk from the impending cuts, raising the spectre of additional company failures as a result of bad debt.

Furthermore, Begbies cited a significant increase in the number of HMRC winding up petitions – up 39% between August and September, as evidence that the government may be taking a tougher stance on chasing taxes.

All of which points to a difficult quarter ahead for UK Print, with the likelihood of significant reductions in print spend, a less sympathetic taxman and a possible return to the dark days of 2008/09, when a slew of printers were the victims of corporate failures in their client base.

On the plus side, and the government will doubtless have been scratching around for positives ahead of this week’s announcement, according to the latest report from the Ernst & Young Item Club, the likelihood of a double-dip recession in Britain has been exaggerated, while in a joint letter to The Telegraph 35 leaders of some of the nation’s biggest companies have come out in support of the cuts.

However, while these business leaders presumably have faith in the ability of their companies to withstand the impact of an £83bn reduction in public spending, SME printers may not share their confidence.


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