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As ever, recent contradictory headlines in the business press have me wondering which is right? Surely the BoE’s statement that QE is back on the agenda in the face of ‘weaker than expected growth’ as is at odds with GDP surging to its highest level for 4 years?!
Looking at the fundamentals, US commodities are off their May lows, and the commodity shipping market has also rebounded on the back of increased demand for steel in China – all good signs in that this indicates demand is rising, although less good if we hoped for some relief with petrol pump prices!
Closer to home, manufacturing output was reported to be at its highest for 15 years with strong domestic and overseas demand, and is set to continue rising albeit at a slower rate over the next 3 months. I was very surprised to read in the CBI Survey that more firms have reported credit availability improving, as this not what I’m hearing. I wonder if this loosening of credit is applies only to the larger firms – I would be keen to hear if any interim managers agree with the CBI findings?
It remains a tough market out there for interim managers specialising in the manufacturing sector, as the mixed messages in the Press testify – last month, we were led to believe that growth figures were going to be revised down, something that looks highly unlikely this month!
However, storm clouds do remain on the horizon – the PIGS economies panic has subsided to a murmur for the time being and the LIBOR rate remains high, but few companies are seemingly prepared to commit cash from reserves for projects. I am beginning to see an increase in finance led projects, driven in the main by the banks but operational projects remain subdued. My view is that payback periods are perceived as being too long, or the returns not deemed to outweigh the benefits of cash in the bank pending the uncertain outlook. Is this a view shared by readers?
In summary, I sense that the recovery feels more resilient than the headlines give credit for although as a business, we’re seeing very clearly that demand for interim’s varies between sectors. Financial Services (Insurers/ Retail Banks) is booming, Retail is having a tough time as is the Public Sector. Demand in the manufacturing sector remains patchy but there are opportunities, even if finding them is taking rather more effort! Historically, FS has led the UK economy out of recession – will it be the case this time, and if so, is all we have to do hold on for the next 6 to 8mths until the recovery spreads to other sectors? What are your thoughts?
Tom Legard is Head of Manufacturing at Interim Partners.
August 5th, 2010 at 11:06 am
Tom, some excellent points, let me tell you what I’ve had fed back to me.
People I talk to in manufacturing have seen their backlog levels increase over the last two months (sectors do vary though). This, they think, is as much to do with ‘refilling the pipeline’ (customers running down stocks to lower levels to improve cash flow/asset management during the hard times). But they say there is a definite pick-up in customer activity, especially if they play in the export markets (Germany as an example). The knock-on effect is that some are seeing their overdues increasing as their suppliers, who have also cut inventory and labour, struggle to keep up with their demand. I was also told that a similar shortage is starting to occur in labour (mainly skilled) as activity increases within their businesses. Most manufactures cut very deep (I had three plants of over a hundred people each and we reduced salaried costs by a 3rd in ’08 and ‘09) as the recession bit. Now they are finding in critical areas, they have to recruit. But here’s the issue: these companies don’t want to take on permanent staff because there is still a risk because the recovery is still ‘fragile’. This leads me to believe that the manufactures will need very capable interims to bridge the gap. The landscape has changed appreciably in the last two years and as the growth comes back, companies need flexible professional people as they adjust to the new order. That’s where we come in….