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Government spending cuts – the winners and losers

27 October 2010 by

Last week Chancellor George Osborne set out his plans to reduce Government spending by £81b by 2014/15. Government departments suffered cuts averaging 19% over the next four years. But in an act of what its chairman Christopher Rodriguez called "tough love", VisitBritain will be forced to lop a much bigger 34% from its budget, as will VisitEngland. The Government is also reining in spending on travel, introducing standard guidance for all departments on how they should buy accommodation for staff, with the aim of saving £100m a year. Meanwhile, with 490,000 public sector jobs set to go, it remains to be see how consumer confidence will be affected. But on the back of the announcements, who look to be the main winners and losers?

WINNERS

Budget hotels Government travel and accommodation budgets are targeted for an additional reduction of £100m a year. That should send even more business the way of budget operators such as Travelodge and Premier Inn. Premier Inn's owner, Whitbread, indicated in its half year results last week that it had seen revenue from its business accounts swell 24%, with central Government departments and big business responsible for the upswing. Meanwhile, a potential drop in consumer confidence, while not good news, could also spell extra custom for budget operators.

Contract caterers An average departmental cut of 19% over four years means public sector catering sites are likely to close as subsidies disappear - hardly good news. But there will still be opportunities for catering provision, even if it requires more innovation from contract caterers. Martin Archer, HR director at Elior, said he expected caterers would be put under pressure to negotiate new deals, and competition would be fierce. But on the flip side, more government business is likely to go out to tender, especially in the facilities management (FM) arena.

School catering Few school caterers will object to the Government's decision to stop funding the School Food Trust. And they will be happy that schools have been promised increased funding every year for four years and that the School Lunch Grant has been spared the axe.

Last week Chancellor George Osborne set out his plans to reduce Government spending by £81b by 2014/15. Government departments suffered cuts averaging 19% over the next four years. But in an act of what its chairman Christopher Rodriguez called "tough love", VisitBritain will be forced to lop a much bigger 34% from its budget, as will VisitEngland. The Government is also reining in spending on travel, introducing standard guidance for all departments on how they should buy accommodation for staff, with the aim of saving £100m a year. Meanwhile, with 490,000 public sector jobs set to go, it remains to be see how consumer confidence will be affected. But on the back of the announcements, who look to be the main winners and losers?

LOSERS

Provincial /independent hotels Independent hoteliers must be hoping the chancellor's forecast of 2.25% economic growth in 2011 is on the money. The Government is reining in travel spending, just as private sector organisations have. That means small hoteliers must hope that the leisure spend picks up. Richard Fleming, UK head of restructuring at KPMG warned of the possibility of more insolvencies to come if it did not: "Small businesses which supply the public sector are likely to struggle for survival as aggressive ‘supermarket style' procurement favours the larger suppliers," he said.

And PWC predicts 25,000 job losses in hotels and catering as a result of public sector cuts.

Big operators The Government has performed an about-turn on energy efficiency payments, angering many big businesses. Around 20,000 - broadly those whose electricity is metered by at least one half-hourly meter - have had to register for the Government's CRC Efficiency Scheme. The scheme aimed to incentivise the likes of Compass and Whitbread to go green by purchasing allowances from Government for every tonne of CO2 they emit.

Peter Ducker, chief executive of Carepar, the carbon reduction benchmarking company called the decision "very disappointing".

Regional tourism VisitBritain and VisitEngland both saw their budgets slashed by an eye-watering 34% over the next five years. Luckily, VisitBritain's marketing budget is being maintained to help boost tourism during the Olympics. But regional tourist boards face a less certain future, as the Regional Development Agencies (RDAs) on which many rely for funding are scrapped. VisitEngland has set up a transition team to help ensure that key tourism functions continue at a local level until the emerging Local Enterprise Partnerships (which replace RDAs) confirm their approach to tourism, and tourism minister John Penrose sets out his strategy.

VisitBritain gets some ‘tough love' during Comprehensive Spending Review >>](http://www.caterersearch.com/Articles/2010/10/20/335568/visitbritain-gets-some-tough-love-in-comprehensive-spending-review.htm)

[Consumers preparing to rein in expenditure >>](http://www.caterersearch.com/Articles/2010/09/27/335291/Consumers-preparing-to-rein-in-expenditure.htm)

[Austerity measures depress confidence of catering sector >>](http://www.caterersearch.com/Articles/2010/07/06/334205/austerity-measures-depress-confidence-of-catering-sector.htm)

<span class=""noindex"">By Neil Gerrard

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