Public and social sector: building resilience amid shifting trade policies

In the short term, the volatility in global markets could reduce the value of public sector investments, including pension funds for many countries where they are heavily invested in global equities. This could necessitate adjustments in employer contribution rates and impact the financial stability of public sector pension schemes. Additionally, the increased cost of goods and services due to tariffs could lead to higher operational costs for public services, from healthcare to education, thereby reducing their efficiency and effectiveness.

Our public sector clients are already dealing with tight margins and high expectations. The risk is that even small changes in global trade costs can significantly disrupt long-term planning and service delivery.

Peter Cudlip Global Head of Public and Social Sector

Tariffs are just one part of the wider economic context. Our C-suite barometer highlights that in the long term, the economic uncertainty often leads to reduced investment and the potential for a global recession, which could in turn lower tax revenues and put further pressure on already stretched public budgets. This could result in cuts to public services, affecting everything from social housing projects to large-scale infrastructure development. Countries with less diversified economies or those heavily reliant on international trade may face more severe impacts, potentially leading to increased borrowing and debt levels.

Our C-suite barometer also highlights that responsible supply chains remain a top ESG priority for sustainability reporting. However, these global supply chain disruptions caused by tariffs could delay or increase the costs of major public sector projects, such as new hospital constructions, infrastructure upgrades or projects that are reliant on technology such as solar energy infrastructure. This could hinder the ability of governments to meet the needs of their populations and maintain public trust.

Public sector bodies and governments that are put under increasing stress as a result of a wider trade war will need to act - and if that activity involves further spending restraint it could well lead to further domestic political action.

 Looking ahead, organisations in the public and social sector may find opportunities to review sourcing strategies, build regional supplier partnerships and reinforce risk management frameworks. Those that actively plan for change and engage cross-functional leadership teams are more likely to maintain service continuity and protect value for the public.

To navigate this uncertainty, public organisations must strengthen scenario planning and build flexibility into their procurement, budgeting and operational models.

Mathew Cooling Director - Risk Consulting