How will the Comprehensive Spending Review affect the Private Sector?

By | October 25, 2010

spending-reviewThis blog first appeared as a guest blog for the Forum of Private Business

How will the Comprehensive Spending Review affect the Private Sector?

Soon after the election, the government announced the bonfire of quangos – and scrapping 192 public bodies.  This week we wait to hear the full impact of cuts across the rest of the public sector and tax changes for individuals and business.  And alongside this, Sir Philip Green is calling for centralised procurement.

1. Where will the cuts affect the private sector?

The way business is done with the government

Every government department will have to completely revise the way they do business.  The message last week is that it will be the larger businesses who will win the new government contracts – but expected to deliver major cost savings for winning them.

Middle income spending will be squeezed

It is sounding like those earning more than £35k are going to be hit the hardest.  £40k may sound a lot but people earning at these levels tend to have every sort of expenditure, heavy mortgages – and high aspirations.  Discretionary spending will be hit.  And every business in the country who makes things for this market or is retailing to them needs to anticipate the effects.  Even if individuals are not as badly hit as they fear, perceptually the mood will be this is the time to hold back on spending.

2. What are the new opportunities for businesses post CSR?

Every downturn has its opportunities.  The art is to be open-minded about these and be prepared to be very flexible to exploit them.

Yet more efficiencies

The government and businesses will all be looking for yet more cost-savings.  Businesses need to look for ways to

  • Add on additional services and products to provide greater buying efficiency – this could be done by partnerships with other businesses or expanding the product range that you offer
  • Look for the ‘big beasts’ in business today, still stuck with large overheads – even if they have made cutbacks themselves.  Recessions provide opportunities to start new businesses with low overheads – property, rent and employment are all low cost at the moment – and undercut the larger players.  But remember, whatever they say, government departments will still feel more comfortable commissioning from the ‘big beasts’ as they have always done.  The new kids have really got to show value

What are people still buying?

Just because we are in recession does not mean the supermarket shelves are bare.  All four of the top 4 supermarkets have traded very effectively through the recession – spotting that if people cannot afford to eat out, they will treat themselves to a ‘dine-in’ experience, which supermarkets have packaged and delivered at phenomenal value.  Where and how can you tap into this market and add value?  How can you get people to buy your products in new ways, packaged differently?

A new economy

The days of the economy growing year on year are gone for the foreseeable future.  But the former heady days were largely founded on speculation – there was no substance behind the growth.  Now it is time to go back to making and designing ‘things’.  You need to produce products with real value, so people can see where their money is going.

Don’t expect help from parliament!  But do train your local MP!

The new intake of MPs is largely made up of lawyers and PRs.  We could debate how business-focused these careers are, but I will say most of them don’t have a clue about how to create wealth.  They are divorced from what is going to happen to business.

It’s up to all of us to help our MPs to understand business better.  Have you got any suggestions as to how we do this? Would welcome your thoughts.

About Julian Rawel

Julian Rawel is Director of Executive Education at the School of Management. He has previously held positions of Groups Sales and Marketing Director, Eurocamp plc and Marketing Director, Royal Armouries Museum. Julian has been a non executive director of travel industry bodies ABTA and AITO. He has a BA in Geography from Leicester University and an MSc in Tourism Management from Manchester Metropolitan University. Julian is a Fellow of the Chartered Institute of Marketing and a Chartered Marketer.

Specialties:  Consumer and business marketing, Branding, General management, Management development