BUSINESSES appear to be in agreement on one thing: the emergency Budget struck the right balance between spending cuts and tax rises.

However, most firms would now like the government to prioritise transport spending – especially in the major spending review it is conducting this autumn according to the British Chambers of Commerce’s latest Monthly Business Survey.

In a vote of confidence for the Chancellor’s approach to dealing with the deficit, 64% of businesses thought the balance was correct. However, two-thirds (67%) also believed that the cuts would have an impact on their profitability.

Of those who said that their profits will be affected, around half stated that spending cuts would result in a dampening of demand while 30% thought they would be impacted directly through the loss of public sector contracts.

The results suggest that while businesses support moves to curb Britain’s deficit, they recognise that austerity measures will have a potentially negative impact on their balance sheets – and on local communities. This view was further cemented by 70% of businesses, who said they believed that spending cuts would slow economic development in their region.

Asked how government should prioritise scarce public investment over the next five years, the vast majority of firms selected transport, regional economic development, and access to finance as their top three priority areas.

“Business understands that the next few years are going to be acutely painful as austerity measures take hold,” said David Frost, director general of the British Chambers of Commerce.

“Local communities are going to be impacted, but reducing the unsustainable deficit – with a focus on spending cuts – is the right way to return our public finances to health and restore confidence.

“However, deficit reduction alone is not enough to secure recovery. There will now need to be a relentless focus on ensuring business is able to deliver growth, create jobs, and drive a lasting recovery. Limited spending will have to focus on areas that boost productivity – transport, innovation and skills. Interest rates will have to stay low, burdensome new employment red tape must be blocked, and we will have to generate serious growth across all regions of the country.”

Latest British Chambers of Commerce survey report