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Are public-sector cuts hitting the private sector?

The UK government is attempting to push through massive public-sector budget cuts in the short to medium term and there are already signs that these cuts are impacting upon the private sector. One example is service provider Connaught which has seen its share price collapse from over £3 to just over £1 in three days after announcing that a number all local authority projects had been put on hold for the short term. Can we expect more bad news from the sector in the short-term?

While some other companies that have direct links with the public-sector have attempted to distance themselves from the Connaught statement there is no doubt that public-sector expenditure will decrease dramatically in the short to medium term. The UK government had hoped that private sector companies would step into this "vacuum" created by a reduction in public-sector spending but at the moment the very opposite seems to be happening.

Opponents to the UK government's public sector budget cuts, and the speed at which they will be brought in, will likely use the situation at Connaught as a barometer for the short to medium term. While in reality the UK government has no option but to reduce public-sector spending this may well turn out to be too much too soon for the UK economy.

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