Following last month's emergency Budget, government departments were ordered to reduce annual budgets by 25% before the next election.

In addition, local government is bracing itself for the autumn spending review, in which cuts in central grants of up to 40% could be announced.

As budgets are squeezed, public sector print buyers have already started looking to their supplier base for potential savings.

Iain Black, group sales and marketing director at Paragon Group, said: "There is a definite feeling coming from the public sector that we're in for a second round of price cuts."

However, while prices are coming under pressure, the scale of the cuts has meant that local authorities are actually being far more open with their suppliers than they have in the past.

"They are willing to take a much more collaborative approach," said Black. "They're telling us 'these are the savings we've got to make, now how can you help us to achieve that?'"

Adam Baxter, joint managing director of Cheadle, Cheshire-based transactional printer BurrBaxter, added: "There has been a complete and utter change in the psychology of public sector buyers in the last few months."

The company, which specialises in the low-cost production of payslips, has seen enquiries from public sector clients soar in recent weeks as the budgetary squeeze has tightened.

"Having had nothing for the first year – it's gone wild since the Budget," said Baxter. "This week, we've had six new public authorities contact us to send in specifications of their print – one came in that I've been chasing for several years."

BurrBaxter uses older equipment to produce print at prices that would be uneconomical on the latest million pound presses – this puts it at a distinct advantage in the current climate.

"The product we have is very green and the way we produce it means it's a bit cheaper and suddenly, if you're in the public sector and having to save however many thousands of pounds in your department, it's a question of having to find those savings in any way you can – or looking someone in the eye and telling them they've got no job," said Baxter.

"Several councils have said to us in the past week – give us prices, give us all the details so we can move [work over] to you so that somebody doesn't come in and make someone redundant."