The spending cuts at the Department for Business, Innovation and Skills (BIS) that were announced recently as part of the new coalition government's GBP6bn initial deficit reduction package are likely to have a significant and disproportionate impact on small businesses in the UK, according to those representing the sector.

BIS announced on Monday that as part of the 'efficiency savings' drive, it would be taking a GBP836mn hit, comprising savings in the following areas, among other initiatives:

• GBP100mn in efficiency savings will be made across the department and its partner organisations;
• Investment in the UK Centre for Medical Research and Innovation (UKCMRI) project for a new biomedical research facility to be located in Central London will now not be brought forward this year but spread over six years, representing a saving of GBP 233mn;
• GBP74mn will be cut from the Regional Development Agencies – with the total cut representing GBP270mn shared between Department for Communities and Local Government (CLG), Department of Energy and Climate Change (DECC), Department for Environment, Food and Rural Affairs (DEFRA) and BIS;
• GBP200mn in efficiency savings will be made in the Higher Education budget;
• The Train to Gain budget will be refocused on apprenticeships and college buildings, representing a saving of GBP200mn;
• GBP18mn will be saved by stopping low priority projects like the Institute of Web Sciences (researching semantic web technologies) and the SME Adjudicator, announced by previous Chancellor Alistair Darling as part of an initiative to improve SME access to credit;
• GBP11mn will be chopped from the UK vocational reform budget.

According to the Business, Innovation and Skills Department, spending on research, innovation, business and enterprise, and student numbers in higher education is to be protected.

The cuts represent 3.9% of the department’s total budget.

Responding to the announcement of the spending cuts this week, head of policy at the Forum of Private Business, Matthew Goodman, observed that:

"The cuts announced by the Government are regrettable and many smaller businesses will be affected in one way or another."

He continued:

"The GBP836mn reduction earmarked for the Department for Business, Innovation and Skills could potentially mean that business support will be one of the worst casualties of the cutbacks. This, of course, is a cause for concern."

"However, the impact of the cuts can be mitigated by greater efficiency and use of resources at grassroots level, rather than traditional top-down approaches such as indiscriminate redundancy programmes and blanket spending cuts in certain areas."

Mr Goodman went on to suggest that the UK's smaller enterprises could show the government a thing or two when it comes to doing more with less, stating that:

"We believe that smaller businesses are expert at doing more with less – many of our members have been put under a huge amount of pressure over the past two years or so, but their dedication and attention to detail ensured that their businesses survived. We believe the public sector can learn some valuable lessons from their experiences."

The Forum pledged to examine the potential impact of changes to local government funding on small businesses.