Business Leaders See No Recovery in 2010
- Fewer than two in ten senior managers expect sustained recovery in 2010
- Firms focus on damage limitation as one third expect lower sales and profits than 2009
- 2010 budgets mired in confusion
- Lack of bold strategic decision making at top of UK’s largest firms
Senior managers at the UK’s largest companies are deeply pessimistic about the chances of sustained economic recovery in 2010, according to a new study by Roland Berger Strategy Consultants.
Contrary to recent reports of business confidence steadily returning, one third of business leaders anticipate even worse sales and profits this year than in 2009.
Yet companies are still shying away from bold strategic decision making, according to Shooting in the Dark, a study among senior managers at 100 of the UK’s largest 500 companies.
No light at the end of the tunnel
Barely 17% of senior managers at the UK’s biggest firms expect sustained economic recovery in 2010 on which a reliable business plan can be based. Four fifths (80%) expect this to arise only in 2011 or even later. Alarmingly more than a quarter (27%) expect prolonged difficulties with sustained predicable recovery only anticipated in 2012 or later.
The majority (51%) of firms do not expect the underlying market for their business to recover to pre-recession levels until 2012 or later.
Poor 2010 business performance expected
Nearly two thirds (64%) of senior managers expect the prevailing poor economic climate to continue to have a negative impact on their company in 2010.
Almost a third (31%) anticipate even lower sales than last year, a similar proportion (30%) expect to achieve lower operating profits than in 2009.
Klaus Kremers, Restructuring Partner at Roland Berger Strategy Consultants, comments:
“Aside from the odd bright spot last year, such as the stronger Christmas performance of retailers, 2009 was disastrous for the majority of firms.
“To learn that around one third of the UK’s biggest companies anticipate an even worse year in 2010 is alarming to say the least.”
Businesses forge uncertain 2010 plans
Confusion and uncertainty are clouding the budget setting process at our largest firms, according to the Roland Berger study.
The majority (56%) of senior managers complain that budgeting for 2010 in the continuing uncertain economic climate is extremely difficult; the same proportion (56%) feel that making accurate predictions for 2010 performance is nearly impossible.
Damage limitation appears to be a major focus informing the 2010 budgeting process at UK firms. The vast majority (88%) of companies plan to focus on stabilising the business, whilst seven in ten (70%) will focus on minimising losses this year.
Redundancies, pay and headcount freezes look set to remain on the business landscape in 2010, with nearly nine out of ten (89%) firms planning further reductions in personnel operating costs this year, up 7% from the 82% that addressed these costs last year.
Planned levels of investment at UK companies are a key indicator of business confidence. 2009 saw 71% of firms freezing or reducing investments, and companies look set to be equally cautious this year, with more than two thirds (67%) continuing this policy in 2010, the study reveals.
Tinkering around the edges
Looking back at 2009, the research uncovers a lack of bold strategic decision making among senior management at the country’s largest firms last year.
Companies have undertaken a variety of initiatives to improve performance; for instance, significant proportions have frozen investments (71%), addressed pricing (96%), reduced non-personnel operating costs (98%) and tackled overheads (96%).
However, far lower proportions have taken the broader, bolder strategic decisions: only around half (57%) have seriously tackled structural overcapacities built up during the boom years; less than half (43%) have assessed and optimised the global footprint of their organisations; and barely a quarter (28%) have considered consolidation or strategic divestment opportunities.
Klaus Kremers warns: “Companies did well to reduce operating costs and adjust pricing in 2009, but must think more strategically and take bigger decisions in the uncertainty of 2010.
“However, topline maintenance and growth will become more critical. Firms should plan now how they intend to participate in growth regions, and as the M&A market begins to thaw, should look to dispose of unprofitable, non-core business and remain vigilant for complementary acquisitions.”
ends
About the Study
Shooting in the Dark is based on interviews with senior decision makers at 100 of the UK’s 500 largest firms by turnover. The sample was drawn from a broad selection of market sectors, including particular focus on retail, consumer goods, financial services, property and construction. All firms involved in the study have an annual turnover around or greater than £500million.
- Firms focus on damage limitation as one third expect lower sales and profits than 2009
- 2010 budgets mired in confusion
- Lack of bold strategic decision making at top of UK’s largest firms
Senior managers at the UK’s largest companies are deeply pessimistic about the chances of sustained economic recovery in 2010, according to a new study by Roland Berger Strategy Consultants.
Contrary to recent reports of business confidence steadily returning, one third of business leaders anticipate even worse sales and profits this year than in 2009.
Yet companies are still shying away from bold strategic decision making, according to Shooting in the Dark, a study among senior managers at 100 of the UK’s largest 500 companies.
No light at the end of the tunnel
Barely 17% of senior managers at the UK’s biggest firms expect sustained economic recovery in 2010 on which a reliable business plan can be based. Four fifths (80%) expect this to arise only in 2011 or even later. Alarmingly more than a quarter (27%) expect prolonged difficulties with sustained predicable recovery only anticipated in 2012 or later.
The majority (51%) of firms do not expect the underlying market for their business to recover to pre-recession levels until 2012 or later.
Poor 2010 business performance expected
Nearly two thirds (64%) of senior managers expect the prevailing poor economic climate to continue to have a negative impact on their company in 2010.
Almost a third (31%) anticipate even lower sales than last year, a similar proportion (30%) expect to achieve lower operating profits than in 2009.
Klaus Kremers, Restructuring Partner at Roland Berger Strategy Consultants, comments:
“Aside from the odd bright spot last year, such as the stronger Christmas performance of retailers, 2009 was disastrous for the majority of firms.
“To learn that around one third of the UK’s biggest companies anticipate an even worse year in 2010 is alarming to say the least.”
Businesses forge uncertain 2010 plans
Confusion and uncertainty are clouding the budget setting process at our largest firms, according to the Roland Berger study.
The majority (56%) of senior managers complain that budgeting for 2010 in the continuing uncertain economic climate is extremely difficult; the same proportion (56%) feel that making accurate predictions for 2010 performance is nearly impossible.
Damage limitation appears to be a major focus informing the 2010 budgeting process at UK firms. The vast majority (88%) of companies plan to focus on stabilising the business, whilst seven in ten (70%) will focus on minimising losses this year.
Redundancies, pay and headcount freezes look set to remain on the business landscape in 2010, with nearly nine out of ten (89%) firms planning further reductions in personnel operating costs this year, up 7% from the 82% that addressed these costs last year.
Planned levels of investment at UK companies are a key indicator of business confidence. 2009 saw 71% of firms freezing or reducing investments, and companies look set to be equally cautious this year, with more than two thirds (67%) continuing this policy in 2010, the study reveals.
Tinkering around the edges
Looking back at 2009, the research uncovers a lack of bold strategic decision making among senior management at the country’s largest firms last year.
Companies have undertaken a variety of initiatives to improve performance; for instance, significant proportions have frozen investments (71%), addressed pricing (96%), reduced non-personnel operating costs (98%) and tackled overheads (96%).
However, far lower proportions have taken the broader, bolder strategic decisions: only around half (57%) have seriously tackled structural overcapacities built up during the boom years; less than half (43%) have assessed and optimised the global footprint of their organisations; and barely a quarter (28%) have considered consolidation or strategic divestment opportunities.
Klaus Kremers warns: “Companies did well to reduce operating costs and adjust pricing in 2009, but must think more strategically and take bigger decisions in the uncertainty of 2010.
“However, topline maintenance and growth will become more critical. Firms should plan now how they intend to participate in growth regions, and as the M&A market begins to thaw, should look to dispose of unprofitable, non-core business and remain vigilant for complementary acquisitions.”
ends
About the Study
Shooting in the Dark is based on interviews with senior decision makers at 100 of the UK’s 500 largest firms by turnover. The sample was drawn from a broad selection of market sectors, including particular focus on retail, consumer goods, financial services, property and construction. All firms involved in the study have an annual turnover around or greater than £500million.
