Opportunity in uncertainty adds ray of sunshine

Gateley Plc's Northern Restructuring Conference

Economic uncertainty will test the adaptability of management teams, but the best ones will seize on the opportunities it presents, a packed conference was told.

A five-strong panel were speaking as part of Gateley Plc’s Northern Restructuring Conference at Manchester’s Bridgewater Hall. With the theme of “Is winter coming?”, the panel highlighted many of the current difficulties facing businesses, as well as the more timeless challenges.

“It’s quite clear there are more downside risks, whether that’s Brexit or other things that are going on, while we have got a productivity challenge and a skills need,” said Andrew McPhillips, chief economist at the Northern Powerhouse Partnership. “There are signs that there could be harder times ahead.”

Find out more about the Gateley Plc Restructuring conference and watch the conference video.

But the think tank has identified key sectors which it believes can help drive growth across the North of England in the years ahead.

He said: “Looking at the sectors that we think hold the greatest opportunity for the North to drive forward and might drive some higher growth and higher productivity. Unsurprisingly digital is in there, energy, advanced manufacturing, health innovation – we are focusing on those four, and financial and professional services is there to support that.”

Gateley Plc’s William Ballmann and Andrew McPhillips from the Northern Powerhouse Partnership at the Northern Restructuring Conference

Gateley Plc partner and head of Leeds office William Ballmann highlighted the differences between what is happening on the west of the Pennines – where two metro mayors, Steve Rotheram in Liverpool and Andy Burnham in Manchester, were elected earlier this year – and the frustrated efforts to get a political solution on the eastern side.

He said: “There are some significant differences because Manchester has really got its act together as an economic region whereas Yorkshire remains really quite split. That continued fracture is not going to do the Yorkshire side of the Pennines any good compared to Manchester.”

Across the wider economy Lloyds Bank’s Jimmy Williamson also sees a real mixed picture, but believes there remains enough to be positive about.

“I think we are having an Indian summer and we can sometimes forget that,” he said. “The great majority of businesses that we see and deal with are doing well – they are just not publicising it.

“If you look at the overall environment, you see a liquidity in capital markets that we haven’t seen for a generation, which gives availability for investment for businesses. We sometimes forget that any businesses that are exporting has anywhere between 15-20% upside in the currency effect.

“I think it would be wrong to assume that winter would be about to happen. Having said that, there are some headwinds.”

He highlighted the oil and gas industry, which he described as having been “in a Siberian winter for a couple of years”, and consumer-facing markets as two areas that are facing real pressure.

More broadly, Williamson thinks it’s a good time for business owners who are looking to exit to make their move. He added: “It’s a mixed bag out there. If you are selling a company just now, it’s a great time to sell a business. I’m a little bit cautious about that myself, maybe it means it’s not a great time to buy a business?”

In uncertain times, the skills and adaptability of the management team become even more important.

Find out more about the Gateley Plc Restructuring conference and watch the conference video.

Warwick Ley, of turnaround specialists RooGreen Ventures, said: “Particularly in this environment, when we are all talking about uncertainty, you look at the business and start with the management team.

“Is that a company that will in times of uncertainty, turbulence and volatility, use it to its advantage? Or is it a management team that will fall victim to Brexit, interest rates, whatever?”

“Let’s not forget when there is turbulence and uncertainty, that’s when some of the best business can be done. That’s when you can really grab hold of some good opportunities.”

Funders will look at the strength and mindset of the management team, said Ley, as well as the business’s culture and its customer proposition.

“There has never been a more important time, I think, to have a very clearly defined proposition,” he said. “What makes it different?

“These are the sorts of things that are often forgotten in a turnaround. It is easy going to deal with costs, for example, it’s relatively easy to manage cash.

“But what are the skills needed to make that business thrive in five months’ time or five years’ time? That largely comes down to how relevant that proposition is and everything that goes along with that – the culture and how the business is managed.”

Advisers can assist the management team by providing a different approach to business problems.

The panel discussion at Gateley Plc’s Northern Restructuring Conference

Ballmann added: “Lawyers see things from a different perspective, because of the way we have been trained. The same applies to accountants, too.

“The two complement each other in a way that is essential. The most common refrain I have had since I have been a non-executive director is ‘why didn’t we think of that?’. It was something that, more often than not, was an issue I thought was plain common sense, but it wasn’t to them – there’s a dynamic there where we can definitely add value.”

While an external perspective adds a different viewpoint, the question of talent in a business does not always require an answer of introducing someone new.

“Sometimes it’s about the stars you have got within and not just the stars you can bring in from outside,” said Matthew Deering from Endless.

He added: “It does start with good leadership and people setting the right tone at the top, that often does just percolate down through the layers.

“Often the people within the business know what’s going wrong and often it’s allowing those people to step forward and put their ideas forward – and feel that things are going to happen if they do – that starts to liberate an organisation and get the turnaround moving faster.”

Making sure that momentum is maintained and people stay committed to the success of the turnaround is driven by the cultural change within the business. He highlighted alignment with incentives and communication as two key factors in that process.

“Make sure everyone feels the benefits from the company starting to move forward in terms of its financial performance and other measures and make sure that everybody knows the direction of the business, where it’s going, where the successes are coming from, where the challenges are, and everyone has a part to play in addressing that,” added Deering.

“Once you start getting that positive momentum in the business, everybody feels the ship is moving in the right direction and culture becomes self-sustaining at that point.”

Watch the Conference highlights and read more on navigating complexity, change and uncertainty in the future

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