Budget impasse could affect area businesses

Golden Seal Enterprises President and CEO Frank Phillips, assisting student Joseph Rich of High View, W.Va., at his shooting range, said pending cuts could hurt his firm as 60 percent of his business is connected to the federal government. (Photo by Jeff Taylor/The Winchester Star)

Golden Seal Enterprises President and CEO Frank Phillips, at his Frederick County business Thursday, said he’s concerned a sequester could impair his company’s growth this year. (Photo by Jeff Taylor/The Winchester Star)

WINCHESTER — At the beginning of the year, Congress delayed a $1.2 trillion federal budget reduction over 10 years, but the cuts are scheduled to start taking effect March 1.

The cutback in federal spending, known as sequestration, could hit businesses and the recovering real estate market in the Winchester area.

According to a study by George Mason University economist George Fuller, Virginia stands to lose slightly more than 200,000 jobs from the sequester.

Unemployment would quickly rise due to a decline in federal procurement and federal payroll spending, and from there would ripple out — affecting suppliers and vendors associated with prime contractors. Other businesses would also be hit by a drop in spending from federal employees, contractors, suppliers and vendors.

Businesses like Frederick County-based Golden Seal Enterprises could soon feel the pinch.

The company — located just south of Winchester Regional Airport — provides security services and private security training and has about 60 percent of its business tied to the federal government, according to president and CEO Frank Phillips.

The last two years have been tough, as government departments have been freezing their expenditures, Phillips said. And he’s worried about Golden Seal’s economic growth in 2013.

“We’re living in uncertain times,” he said.

Although the sequester might cause Golden Seal financial hardship, he would prefer it over Congress kicking the problem down the road and continued uncertainty.

Golden Seal has 25 full-time local employees and 50 to 60 independent contractors around the country and world, and Phillips said the company has started to pursue other opportunities outside the U.S. due to frustration with federal budget uncertainties.

Other local businesses would also likely take hits, according to Mike Guevremont, chairman of the Top of Virginia Regional Chamber.

He mentioned federal offices in the Winchester area — the Federal Emergency Management Agency, the FBI, the Army Corps of Engineers — that are facing cuts.

“That will ripple outward,” he said.

It could hurt local hotels, office suppliers, cleaning services, restaurants and other business as federal money evaporates from the local economy, Guevremont said.

Any downturn in the local economy could hurt the fragile recovery in the Winchester area housing market, said Ron Price, a mortgage consultant at Success Mortgage in Winchester.

Home prices and sales have begun to rebound after crashing in 2009, but there’s still a long way to go, he said.

“The market is still weak,” he said. “It’s starting to recover, but it wouldn’t take much to go right back where we were.”

— Contact Conor Gallagher at cgallagher@winchesterstar.com