Public sector spending cuts have led to a surge in the number of insolvencies and profit warnings among government suppliers, according to research published today.

Care home suppliers have been particularly badly hit, while major property-related companies including social housing company Connaught and infrastructure specialist Mouchel have reported significant losses.

The research, published by accountant Wilkins Kennedy, shows the number of companies supplying goods and services to the public sector going bust has leapt by 47% in the past year. Overall insolvencies dropped by 5% in the same period.

There were 168 businesses in the health and social services, education and defence sector that went bust in the first six months of 2010 versus 114 in the first half of 2009.

Care home suppliers that have become insolvent include Cliftonville Nursing Homes and the New Victoria Hospital. Southern Cross Healthcare has also issued a profit warning.

Anthony Cork, director at Wilkins Kennedy said the government’s austerity drive said this research shows that the government’s austerity drive is resulting in businesses going bust, rather than just hitting their profits.

“Those companies that have become too dependent on the public sector – be they in recruitment, outsourcing, construction or marketing services are beginning to feel the pain. It is not just the actual cost cuts that are causing problems but the delay by public sector bodies making spending decisions,” he said.

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