The Spending Review: bad news for small businesses?

Small businesses in rural areas have welcomed George Osborne’s announcement that the roll out of super-fast broadband will go ahead – curtesy of a bit of BBC-squeezing.

But the CSR could still spell disaster for many SMEs.

First, there’s the issue of public spending cuts, which will inevitably hurt businesses who rely on the public sector. With local government cuts of up to 30%, SMEs with council contracts are likely to see vital revenue lines severed. It’s a point Jane Bennett, campaign manager at the Forum of Private Business, has already expressed concern about.

Then there’s the areas where the public sector plays a big part in regional economies, having stepped in to fill the gap left by the decline of traditional manufacturing industries. Places such as Durham could see consumer spending power seriously depressed as a large proportion of its workforce join the dole queue. If so more SMEs will shut shop as people are forced to find ways to do without their services.

But it’s not just Durham that will be hit hard, according to PriceWaterHouseCoopers some one million people will become unemployed as a result of the spending cuts, around half of which will be in the private sector. In this scenario a consumer-led recovery looks unlikely. 

Of course this will create the opportunity for some people to take ownership over their work/life and launch a businesses. But the CSR is also a huge gamble with Britain’s economy and its 4.8 million SMEs – one many may feel is simply not worth taking while the business environment is already so precarious.