Economy 'Needs Smaller Business Lessons'

Government departments could learn from smaller businesses when trying to manage shrinking budgets.

According to the Forum of Private Business - which was reacting to the spending cuts announced yesterday - Whitehall should look at how recession-hit smaller businesses have managed to cut costs - without sacrificing the quality of their goods and services.

Many Forum members have seen severe reductions in their revenue streams since the economic downturn took hold, but have managed to weather the storm through a combination of flexibility, efficiency and good relations with employees.

The Forum believes Government bodies could follow the example set by smaller firms when coming to terms with significantly reduced budgets.

Head of Policy, Matthew Goodman, said: "The cuts announced by the Government are regrettable and many smaller businesses will be affected in one way or another.

"The £836 million reduction earmarked for the Department for Business, Innovation and Skills could potentially mean that business support will be one of the worst casualties of the cutbacks. This, of course, is a cause for concern," he said.

"However, the impact of the cuts can be mitigated by greater efficiency and use of resources at grassroots level, rather than traditional top-down approaches such as indiscriminate redundancy programmes and blanket spending cuts in certain areas.

"We believe that smaller businesses are expert at doing more with less – many of our members have been put under a huge amount of pressure over the past two years or so, but their dedication and attention to detail ensured that their business survived.

"We believe the public sector can learn some valuable lessons from their experiences."

Mr Goodman added: "Perhaps it would be useful if senior managers in the public sector spent some time visiting successful Small and Medium Enterprises (SMEs) so they can see first-hand how organizations can provide more value for money with enough determination and hard work," and said the Forum would be keeping a close watch on how a shake-up of local government funding will affect smaller businesses.

He commented: "The Chancellor has said that a lot of the ring-fencing which currently restricts council spending will be removed.

"This could potentially be helpful to small businesses if town halls use it as an opportunity to direct more resources to supporting their local economies. It could, however, place key support services for local businesses under threat.

"We'll monitor the situation and, of course, do everything we can to protect the interests of our members."

(BMcC/GK)