UK government contractors warn austerity cuts threaten their future

Public sector procurement chiefs will exploit weak, existing contracts with suppliers to help push through cuts, experts warn, making government contractors even more at risk during the current UK austerity drive. The danger to firms, ranging from small teams of window cleaners right up to public companies, comes as many suppliers to the public sector are already feeling the pressure from a government determined to fulfill its promise to slash spending.

The Government's plans have already resulted in Cable & Wireless Worldwide – which provides telecommunications to large corporations, as well as local authorities and government bodies – issuing a profit warning last month that caused its shares to slump by 17 per cent.

Alastair Rimmer, head of the business strategy unit at accountants PricewaterhouseCoopers, said: "UK companies need to stress-test their business models and revisit their business plans today rather than waiting for the detail of the comprehensive spending review in the autumn. The first step is awareness. Many companies don't know the extent to which their revenues depend on public money, and only a few have made plans to deal with the inevitable falls that the spending cuts will bring."

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