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Mid-market outlook: The impact of sequestration

Mid-market perspectives blog: Growth enterprise services

Posted by Tom McGee on March 18, 2013

Now that sequestration has become an economic reality, we had an opportunity last week to gain some real-time insights into how mid-market executives view the potential impact for their companies. Because Deloitte Growth Enterprise Services was already scheduled to conduct the first in an occasional series of brief, anonymous surveys to “take the pulse” of the middle market, we added a few questions to gauge the impact of sequestration.

The responses from almost 1,000 executives provide some interesting perspectives. For example, 72 percent indicated that the effects of sequestration will not impact their business and only 10 percent would make cuts to core programs.

While there has been ongoing debate about potential impacts on job growth, it is significant to note that 91 percent of respondents said they did not put off hiring due to sequestration and only six percent would halt hiring plans.

Finally, when asked “Which statement best describes your sentiment on the implications of government spending cuts associated with sequestration,” the majority of respondents (46 percent) selected “Spending cuts will slow economic growth a little.” The second highest number of respondents (19 percent) agreed with the following statement:  “Spending cuts will create slight economic growth by adding certainty and addressing our fiscal challenges.”

While it is certainly true that time will be required to measure the full impact of the spending cuts, the majority of executives we surveyed also projected slight growth in the U.S. economy in 2013 (less than two percent, but more than zero) and slight increases in hiring (less than three percent). It is interesting to note that despite the immediate concern about budget cuts, mid-market executives still expect some level of growth and appear ready to move their companies forward.

We’ll be taking the pulse of the mid-market again in the near future and I look forward to sharing more insights from our executive respondents.

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