Oxygen Finance has warned that the UK could lose up to £148bn as FTSE 100 companies struggle under the strain of public sector cuts and face a huge headache from suppliers as fears grow over company finances and payment terms are tightened.
FTSE 100 companies could see an estimated 10% wiped off their value as a direct result of the government freezing all discretionary spending across public bodies in a bid to save £113bn over the next five years. As a conservative estimate, with many organisations relying more heavily on public sector contracts, the figure of overall potential losses from FTSE 100 companies is almost as much as the current deficit faced in the UK of £159bn.
David Brown, chief executive officer (CEO), Oxygen Finance, said: “It is shocking to see such a rapid decline in the business world following the government’s decision to make severe budget cuts just over a month ago. Such extensive cuts, however, were only ever going to lead us into a double dip recession as they put pressure on other areas of the economy.
“In addition to the loss in value of FTSE listed companies, one of the biggest knock-on effects we expect to see from these cuts is the erosion of buyer-supplier relationships, with suppliers making greater demands of buyers as they are nervous about getting paid.
“To prevent this descent into financial chaos, the government must introduce greater efficiency in public sector spending, using tools to inject cash into procurement departments, helping stimulate the economy and stabilise supply chains, as well as reduce transaction and sourcing costs,” he added.
Cable & Wireless is one of the first companies to feel the force of the UK government’s austerity measures, with £350m being wiped off its value due to a lack of public sector deals, forcing the company to announce a profits warning.
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