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I have seen a recent uplift in organisations within my sector – Construction, Infrastructure and Support Services enquiring about restructuring professionals from CRO level through to HR change mangers.
Could it be that the companies are realising that the signs of an economic upturn may not surface in 2009 and are looking to reduce their cost base through restructuring, to benefit from the savings that would be created in this financial year? I can understand the need for dramatic cost savings within the construction sector; however, I personally did not expect our Facilities Management clients to start speaking of restructuring just yet. The message from FM in 2008 was “working capital is an issue although trading is in line with expectations”. It has now moved to “we are considering a major restructuring exercise” so where has this change of mind set come from?
Ultimately every listed organisation trading in a recession must still demonstrate share holder value and have a “good story to tell”, maybe now is a good time to restructure and show the investors that the current management board can add value just as effectively in a downturn as what they have proven to do in a growth market. Maybe the only good news that is to come out of 2009 is an increased profit percentage against the previous year realised by reducing costs and restructuring.
I would be interested in your thoughts on this matter. What do you believe will be the best route forward for businesses in this sector? Should they attempt financial restructuring when the banks look less inclined to lend? Should they consider restructuring and reorganising of their business when selling on assets or non-core divisions may not reap the same windfalls of eighteen months ago? Do they hold on and wait for signs of recovery? Let’s hope that the Construction and Support Services sector is galvanised into action which should be good news to many in the interim community. I look forward to hearing your views. Mark Kitchen is Head of the Construction, Infrastructure and Support Services Practice at Interim Partners.
Three reports suggest the “green shoots of recovery” spotted by Baroness Vadera and nobody else in January, may actually be making an appearance – BDO Stoy Hayward’s latest survey indicates a return of confidence to the UK economy as firms accept the realities of a recession; a more gloomy report from KPMG suggests a “faint glimmer of optimism” with two thirds of respondents believing the crisis will be over by 2011; and a new report out this morning from the Financial Times suggests that manufacturing “could be in a good position to benefit during a “rebalancing” of UK output… UK manufacturing has been hit less severely than elsewhere.”
Are we really seeing “green shoots?” For the most part, the picture remains mixed from both my personal view on the back of yesterday’s appalling stock market performance and from the feedback I hear from our Interim Executives. History shows us that stock markets have tended to ‘price in’ a downturn and therefore they begin to rise well before the downturn is over – is yesterday’s slump a sign that this has not yet happened, and therefore any upturn in optimism misplaced?
If we look at Interim placements year to date, we have seen a strong performance in retail, seen as surprising to many given that this sector has been a very high profile casualty of the downturn. Sentiment would indicate that businesses having made it through Christmas & the January Sales may be feeling more confident as per the surveys. Financial Services have also seen a marked increase in activity, suggesting that businesses are over the worst – and again, would give backing to the surveys findings.
And what of Manufacturing & Engineering? To be frank, the picture hasn’t particularly improved since January. Precision engineers with a focus on the energy, defence and aerospace sectors, and ‘niche’ manufacturers remain better placed to weather the storm than their peers who focus on consumer end-products, and this reflects the fact that they have provided 70% of potential opportunities for Interim Executives year to date. Interestingly, these have all been biased predominantly towards Gap Management and Operational roles – why no Turnaround roles?
The decline in Sterling by almost a third against leading currencies has definitely helped exporters, and as roughly half of UK exports come from manufactured goods this provides a much needed boost to the sector.
In summary, my instinct tells me there is some way to go – the decision process in terms of start dates for Interim roles remains painfully slow and a cause of great frustration to all, redundancies still loom large which in turn stalls projects earmarked to start Q1 and lessens Interim demand, banks continue to make noises about their desperate need for Turnaround specialists without taking any further action and there is pressure on day rates – mainly because of the lack of £1,000+ per day opportunities coming to the fore, creating the ‘ripple’ effect that top tier candidates are now accepting rates mid tier candidates have charged to guarantee work.
Green shoots in this spring? Well, the weather forecasters are predicting a particularly cold spring – let’s hope we get a summer!
