How will government cuts affects SMEs?

There is a multitude of bloggs around addressing this subject and a piece in Bytestart, is an indicator of what is being said:

Manos Schizas, SME Policy Adviser at ACCA (the Association of Chartered Certified Accountants) said that the Spending Review could have a marked impact on small businesses:

“Cuts to local government expenditure will have a knock-on effect for SMEs. The central Government procurement market represents about £26.6bn of business for UK SMEs. The Local Government procurement market represents another £34.2bn.

Even the ACCA as of October 2010 could only offer comment without clear impact statements.

However, instead of seeking an answer to ‘how government cuts will affect SMEs’ in terms of what exactly and specifically can someone tell me do, we need to look at the wider economics answer, because there is a lot of rhetoric out there.  One thing is certain – that this is the classic Economic Problem played out for real: scarity of means and unlimited wants.  There is less money, and we all want some of it.

There is only one answer, that the market will adjust itself, and a certain level of Darwinism will ensue.  The weaker businesses will fail, and stronger businesses will thrive in the gale of innovation that will follow when fundamental aspects change within the market.

Think of it this way: at a high level Home Office meeting of charity CEO’s about funding and their role in delivering to the government’s Social Exclusion agenda, one CEO stated that charities should be seen to be delivering central services and therefore enjoy the stability of long term funding and essentially become a part of Public Sector.

A dissenter stood up immediately and railed against this, saying that the one set of skills that charities have that sets them apart is the innovation required to build services and resources that deliver to the ever changing needs of grant requirements and social issues.  It was in this very innovation where their skill-set resided.  Making charities stable means losing innovation skills over time – much like the tone of muscles rarely used.  Charities MUST remain as an extension to central services in order to remain lean, flexible, and innovative. It is no different for any SME.

Keeping a hyena hungry will keep it fast and keener in a hunt.  Yes, if it fails in the hunt when it is really hungry – it will die of starvation, but it is the CEO’s job to ensure that the proper resources are applied at the proper time to deliver financial benefit without burning out the staff in the chase or leaving them too lean for too long and fail in the delivery of services.  That is a thought for another day about Risk and Resource management.

Anyone that tells you stability is one answer is speaking hubris.  At the turn of the last century at the meetings of the Royal Society it is said (without citation) that Lord Kelvin, he of ‘Absolute Zero’ fame declared the project of Physics to be complete.  The twentieth century, he declared, would be dedicated to filling in the details.  Within five years special relativity (and later quantum mechanics) reduced Kelvin’s alleged quote to an amusing footnote.

How will government cuts affect SMEs?  In a multitude of different ways, and the response required by us as business owners may need to be just as multitudinous. That’s the issue with economics.  Nothing can be for certain and the market will adjust itself from a series of actions that were prescribed by no one!


~ by crispinread on December 15, 2010.

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