Credit professionals are predicting that the massive cutbacks to be made to the public sector will increase the number of business insolvencies by 10-20% over the next 12 months.

The research was carried out by commercial credit reference agency Graydon UK, and of those surveyed 64% of professionals predicted a 10% increase in insolvencies with 13% predicting company failure rates to be above 20%.

Managing director of Graydon UK, Martin Williams, says businesses have been slow to assess their exposure to the public sector and the effects of cutbacks on them.

“Firms need to heed this warning now and ensure they are fully equipped to monitor exposure to public sector based revenues across the entire length of their supply chains. The failure of a key supplier or customer dependent upon government contracts could inflict huge damage to business stability at very short notice," said Mr Williams.

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