Manufacturers emerging well from recession – PwC

MIDLANDS manufacturers are emerging from the recession stronger and leaner than ever, according to advisers at PricewaterhouseCoopers (PwC).

A recent survey by PwC has found that the UK’s leading manufacturing businesses were not only able to improve working capital by up to 15% during the recession, they also improved gross margins by 1.5% through cost-saving initiatives.

The study concludes that firms which planned ahead fared the best, specifically those which had prepared for a variety of outcomes such as a 10-30% fall in revenues and those which had aligned incentives to cash and working performances.

Other companies to have coped well included those realigning their manufacturing base to take account of cheaper production costs overseas or temporarily in-sourcing products to fill spare capacity and retain workers.

Firms also became more efficient by shedding jobs where necessary, redirecting product to more resilient markets and increasing the skills base of the existing workforce.

Andy Watts, director and manufacturing sector expert at PwC in the Midlands, said: “Manufacturers in the region have been among those that have burst out of the blocks in the first half of 2010, driven by a return to strong growth in emerging markets, a recovering Eurozone and supply chain restocking.

“For UK exporters, the weak pound has also provided a much-needed lift. Many businesses have also used the recession constructively, as an opportunity to carry out radical restructuring, reduce costs, improve agility and renegotiate contracts and pension liabilities.”

He said potential acquisitions and disposals were also being actively evaluated as manufacturers sought to strengthen their market position and take advantage of opportunities to acquire distressed businesses that might add value.

“Businesses that have shown resilience and stability during the recession and emerged leaner and more efficient may now find themselves as potential takeover targets, in particular by overseas conglomerates looking to benefit from weak sterling and gain from opportunities arising during the upturn,” he added.

As the sector emerges from recession, PwC is advising manufacturers in the region to stay focused on efficiency by continuing to provide solutions and looking to exploit any opportunities that come their way.

In addition, it has recommended firms to concentrate on their most resilient markets, invest in R&D and for businesses with cash reserves, to consider bolt-on acquisitions that will add value.

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