23 December 2009 | Jake Kanter
The UK’s economic recovery will be “dampened” by tough choices concerning the public procurement of professional services.
Analysts at the Centre for Economics and Business Research (CEBR) said government purchasing accounts for 15 per cent of total demand in the UK for business services, including accountancy, advertising and consultancy, among others.
Suppliers will “feel the pinch” as the government looks to root out efficiency savings and this retrenchment is likely to undermine economic revival, the CEBR said.
It forecasts a decline in business services growth and for employment levels to be 3.4 per cent lower in 2011 than in 2009 – the equivalent of 120,000 fewer jobs.
The organisation anticipates that research and development firms would be worst affected by any cutbacks, while legal services will also feel the crunch.
The government has already outlined significant cuts to business services. Spend on consultants will be halved and marketing reduced by a quarter under plans set out in the pre-budget report earlier this month.
Jörg Radeke, economist at CEBR, said: “The inevitable fiscal retrenchment means government officials will be asked to find efficiency savings worth billions. It is likely external services provision will be one of the first places where the axe falls.”
His colleague Ben Read said reducing consultancy services could mean blocking out skills that will help the government become more efficient. “Cutting these budgets is an easy option compared with cutting public sector jobs, but unfortunately whoever forms the next government will quickly discover significant cost savings can only be made by cutting the public payroll,” he said.