Andrew Hawkins

£836m is to be cut from the Business budget as part of George Osborne’s £6bn attack on the deficit in the UK economy announced today. In practice a proportion will be re-invested but this still results in a net cut of £700m.

The good news is that the much maligned planned increase in NI will now be reversed, but it appears that the Regional Development Agencies will bear the brunt of the cuts and a significant proportion of Lord Mandelson’s last minute grant programme will also be reversed.

In practical terms this probably means the end of grant-aided research or ‘free’ Business Link consultancy in the short term leaving most SMEs to fend for themselves whether expanding or attempting to recover from the recession.

As many pundits predicted the effects of the recession on smaller businesses are only just beginning to become evident as the real effects of recession start to bite – low order books, cancelled contracts and the payment terms circle becoming tighter and tighter as firms of all sizes start to experience cashflow problems.

Well known Cambridge insolvency practitioner Mary Currie-Smith of Begbies Traynor has recently restated her view that far more businesses will go to the wall in 2010 than in 2009 and certainly so far the statistics prove her correct.

The key to avoiding the potentially dire consequences of falling sales and ever decreasing cashflow is to recognise the problem and act swiftly and effectively. Formal insolvency advice may not be required, but taking appropriate advice as early as possible can often save the day – see case study

If on the other hand your business is booming you may still be affected by cuts to grant-aided programmes which in the past have allowed important R&D projects to go ahead despite limited in-house resource. That sort of funding is likely to disappear.

So what can be done to keep your business prosperous – whether that means aggressive expansion or careful and considered survival?

In short the answer remains the same as ever – be sure of your objectives, be certain that in practical terms they are achievable and create a robust business plan to guide you to success. The banks may not be lending at present, but eventually they will have to loosen the purse strings to survive themselves – when they do, be sure your business is still around to benefit.

Do you have a question or a comment about the business budget cuts?