Union warns of knock-on effect from potential public sector recessionLocal businesses could be affected by job losses, pay freezes and other certainty, according to a UK public sector union.

Unison, which represents 1.3 million workers in Britain, smaller firms may be particularly threatened by potential redundancies in frontline and council services because less money will be spent elsewhere in the economy.

Its spokesperson Anne Mitchell said: "If people are losing their jobs they are not spending money in local shops or local restaurants or going out and spending their money."

She also indicated that with many smaller companies relying on local authority services that may be cut in the coming months, such measures may impact on the private and public sector.

Kevin Green, chief executive of the Recruitment and Employment Confederation, remarked last week that the next government faces a balancing act of generating growth while reforming frontline services without triggering a larger recession in the sector.

By Colette Paxton