By Jaimie Kaffash
23 August 2010
The number of insolvencies involving private sector firms that rely on public sector contracts has risen significantly in the past year, a report says today.
Analysis by the Wilkins Kennedy accountancy firm shows that insolvencies for public sector suppliers went up by 47% in the past 12 months. This is compared with a 5% decrease in insolvencies overall in the same period.
In the first six months of 2010, 168 businesses in health and social services, education and the defence sectors went bust, compared with 114 in the same period in 2009. The health and social care sector has been worst hit, with 106 firms becoming insolvent this year.
Wilkins Kennedy warns that in reality these figures could be higher, as they do not take into account firms where public service work is classified as a minority of the business.
Wilkins Kennedy director Anthony Cork said: ‘While the real cost-cutting that this government has threatened has yet to take place we are already seeing a wide range of companies fail because of delayed contracts.
‘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.
‘Those companies that have become too dependent on the public sector – be they
in recruitment, outsourcing, construction or marketing services are beginning
to feel the pain. It is not just the actual cost cuts that are causing problems
but the delay by public sector bodies making spending decisions.’
He warned that the October Spending Review ‘will heap on even more pain’.
Other large firms are suffering, the report adds, including Connaught, the social housing group, Mouchels, the consultancy firm, and Southern Cross Healthcare, who has said it is experiencing a reduction in admissions from local authorities.
