Public sector cuts 'could wreck private firms'

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Public sector cuts will have to be managed carefully otherwise the chances of new jobs and growth in private firms could be "wrecked", a new report warned today.

The Work Foundation said most new jobs created in parts of the country in recent years were in the public sector, including three quarters in the North of England over the past decade.

Katy Morris, co-author of the report, said: "In the past decade the public sector was the primary driver of employment growth outside London and the South East.

"This high dependence on publicly funded employment in the regions has been exacerbated by relatively weak private sector growth over the past decade.

"The report shows the complex symbiotic relationships between the public and private sectors and wider economic growth. Reducing the public deficit requires all parts of the UK to reduce public expenditure and increase economic growth.

"Public procurement of goods and services is a significant source of revenue for many private sector businesses.

"IT and construction will be hit hard by the spending crunch. Spending by public sector employees also helps to support regional employment in a wide range of sectors such as retail, tourism and leisure.

"Cuts need to be made, but they also need to be managed with regard to the impact on the local labour market so that economic growth can be supported."