Spending cuts – the ripple effect starts

The ripple effect from the government’s spending cuts is staring already. Cancelled projects and a general slowdown in public sector spending have hit the share prices of BT, Logica, Connaught and Cable & Wireless Worldwide (CWW). While some of its business is indeed worldwide, CWW gets about 12% of its revenue from the UK public sector and yesterday its shares fell by a similar percentage after it issued a profit warning

These are the first major signs of the deficit reduction measures spreading to the extended state – the outer fringes of the public sector which are paid by the state but which are not formally part of it. As I said last month, there will be job losses in these companies, especially the smaller ones, before the full weight of the spending cuts hits the public sector’s core employees.

I have noticed, as I have discussed the cuts with friends and colleagues over the last year, how few people realise the extent to which their own jobs are dependent on public spending. There is a tendency among people who work for large corporates to adopt a nowt-to-do-with-me attitude. But, as yesterday’s news from the markets shows, a lot of big companies will take a hammering from these spending cuts. If you work for one of them, even if you are not working on a public sector contract, you are unlikely to be unaffected by the firm’s losses.

Anyone who still believes that these spending cuts will only hit a few paper-pushing bureaucrats is in for a shock.

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One Response to Spending cuts – the ripple effect starts

  1. Pingback: Spending cuts – the ripple effect starts - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

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