Insolvency experts warn of calm before the storm

Trade body cautions that nearly 150,000 small businesses are at risk of failure as public sector cutbacks threaten to bite

Storm ahead: R3 calculates that 148,000 small firms are at risk of failure

2010 could be the year of the calm before the storm as public sector spending cuts threaten to wipe out more than 100,000 small businesses.

That is the stark warning from insolvency trade body R3, which research has found that 10 per cent of all small businesses think they would become insolvent if they no longer had supply contracts with the public sector.

R3 said that business failures ran to 26,000 for the whole of 2009 and have decreased throughout this year.

However, almost half (45 per cent) of the insolvency practitioner members it surveyed said they expected corporate insolvencies to peak in 2011 as the loss of public sector work hits home.

It found that 30 per cent of small businesses say they are “very reliant” or “fairly reliant” on public sector contracts.

Steven Law, president of R3, said: “We calculate that 148,000 small businesses are at risk of failure, but of course not all businesses will lose all of their public sector work.”