A survey of members by R3, the Association of Business Recovery Professionals, found that 48% of them think that construction will be hardest hit; 16% said wholesale and retail; 12% said health and social work.
The insolvency specialists doubted that private sector contracts would be enough to make up the shortfall in public spending. The construction sector already accounts for the greatest number of trading-related bankruptcies, R3 points out, and voiced concern that a large number of failures in this industry would lead to an increase in related personal insolvencies.
R3 president Steven Law said: “Previous R3 research found that one third of small businesses are reliant on public sector contracts so our members expect the fall-out of the public sector cuts to have a significant impact on the private sector in 2011. In view of upcoming cutbacks, businesses reliant on public sector contracts should attempt to diversify their income stream towards a broader customer base.”
However, public spending cuts are not the greatest threat to business in 2011, according to the survey. A half of insolvency practitioners believe that the impending VAT increase is the biggest challenge facing businesses during 2011.