Public sector supplier body count rises

Figures reveal a sharp spike in insolvencies among firms supplying the public sector as government efficiency drive hits home

Safe as Houses of Parliament: Supplying the public sector should no longer be seen as steady business, according to Wilkins Kennedy

The government’s austerity measures have led to a rash of insolvencies among public sector suppliers, new figures suggest.

The number of businesses supplying goods and services to the public sector that went under in the first half of 2010 leapt 47 per cent year on year, according to accountancy firm Wilkins Kennedy.

Meanwhile, overall corporate insolvencies dropped by five per cent.

Anthony Cork, director at Wilkins Kennedy, said suppliers were struggling to keep afloat after taking on high fixed costs in what has traditionally been thought of as a safe sector.

“Whilst 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,” he said.

According to Wilkins Kennedy, some 168 businesses in the health & social services, education and defence sector went bust in the first six months of 2010, compared with 114 in the first half of 2009.

And Cork warned that the Public Sector Spending Review in October would inevitably heap more pain on public sector suppliers.

“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,” he said. “Supplying to the public sector has been seen as safe and steady; unfortunately that is no longer the case.”

Education technology supplier RM was listed as among the walking wounded after the axing of the Building Schools for the Future scheme forced it to issue a gloomy outlook to the City last month.