STOCKS NEWS EUROPE-UK govt spending cuts may hurt firms-GS

Goldman Sachs says UK companies with high exposure to government spendings like Mouchel (MCHL.L), eaga Plc (EAGA.L), Babcock International Group (BAB.L) and De La Rue (DLAR.L) may be affected by public spending cuts in the next few years. Britain's finance minister Alistair Darling is to unveil his budget on Wednesday.

"We believe a tightening in fiscal policy is likely over the next few years following the rapid deterioration in UK public finances over the last few months," the broker says in a note.

"We expect this to translate into declines in real procurement spending from 2010, with important implications for companies that sell to the public sector."

Goldman says it is difficult to precisely identify companies at risk from lower government spending, but it has highlighted firms in its coverage universe for which its analysts estimate more than 20 percent of net income is linked to UK government spending.

Among those firms, which Goldman says have outperformed the market ex-financials since the fiscal stimulus was announced at end of November last year, are Marshalls (MSLH.L), Ultra Electronics (ULE.L), Findel (FDL.L), RPS Group (RPS.L), Bovis Homes (BVS.L), Capita Group (CPI.L), BAE Systems (BAES.L) and Cobham (COB.L).

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