A recent survey from Roland Berger Strategy Consultants, based on interviews with a mix of board level decision makers and Financial Controllers at 52 of the UK’s largest firms, demonstrates that the economic crisis is far from over. The critical liquidity issues in UK business, which characterised the downturn, have not eased and, combined with the lack of restructuring in 2009, will threaten the UK’s return to economic growth.
UK companies are currently forced to actively manage the crisis through liquidity controls, rigorous cost cutting and business plan adjustments. Most companies surveyed will continue to restructure over the next six months. And while compulsory redundancies across UK companies are declining, pay and recruitment freezes will remain crucial.
Only half of those surveyed (49%) believe the worst of the economic crisis is over. However, most companies expect some economic growth in 2010 (between 0.5% and 1.5%) with stronger growth of 1%–2% anticipated for 2011. While 86% of the companies expect to reach pre-crisis sales levels by 2012, a heavier tax burden and restrictive lending will worsen conditions in the short term. Investment levels frozen in 2009 are not expected to increase for the rest of 2010.
Asia has been identified as a clear opportunity for growth by three-quarters of the respondents, but significantly less optimism was expressed for European growth opportunities. Over half expect to finance future growth using their own resources – evidence that companies are unwilling or unable to secure further debt.
Liquidity expectations in Western Europe are similar to the UK, while more companies in China, Middle East and Central & Eastern Europe are experiencing critical liquidity situations. Overall recovery expectations for 2010 and 2011 are slightly more positive in the US and Middle East, with China’s expectations for growth between 8% and 8.5%.