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With Christmas fast approaching, I’m curious to hear the views of the interim community as to what is in store for 2011 – will it prove to be another tricky year, or do the manufacturing output figures, ahead of forecast for another consecutive quarter, bode a more prosperous year ahead?
The debate about Public Sector cuts in the media have subsided to an almost inaudible squeak courtesy of the weather, the Euro, and ongoing debate over tuition fees, which also leads me to ponder an earlier headline – UK Manufacturing to Collapse in 2015. Will fee increases exacerbate an already tight skills shortage that could actually presage a collapse, or will they have little if any impact? I’m interested to hear your thoughts.
I digress – the year ahead. 2010 has not been the easiest year for many interim managers I talk to, but there has been a marked improvement in recent weeks and despite low volume for the higher £750+ per day roles, there remains encouraging levels of demand at the £500-600 level. This reflects the same pattern as Q4 2009, although demand is up by 25% for the manufacturing sector. My only concern is that if this trend follows into 2011, we can expect a 37% drop in activity levels looking at statistics for this year, with no real movement until Q2.
I think we all share concern that the Eurozone could cause a fairly major headache later next year, partly because exports could be hit if the Euro crashes and Sterling loses competitiveness, but more likely because it will suck up precious credit reserves, much needed for growth.
The global economic recovery is strengthening, underscored by a glance at the Commodities index (cause for concern in its own right!), driven in the main by continuing growth and appetite for resource in the Asian economies.
Forgive the analogy, but instinct tells me that whilst next year will be more ‘The Ghost of Christmas Present’ than ‘Scrooge”, it remains in my view a pretty tough outlook for interim manufacturing specialists. I would be interested to hear your thoughts on what you expect will be the main drivers for the next year.
Finally, my thanks to all my interim managers and clients. I’ve thoroughly enjoyed working with you all this year and I look forward to building on our successes to date in 2011 and beyond.
Wishing you all a very Merry Christmas and a Happy and New Year!
Tom Legard is Head of Manufacturing at Interim Partners.
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December 10th, 2010 at 9:11 am
I do think 2011 will prove to be one of the most challenging years in terms of good employment choices. We’ve seen fall off in the higher-end market, which in turn will start to depress the middle sector and then onto the lower end too.
Having said that maybe I’m an optomist having just rejected an offer of perm employment with an NHS Trust in the hope that I can still do much better as an interim.
Global competition for resources will start to hot up at the end of the year - oil and metals especially, which will impact on costs and means that growth won’t really kick in till 2013.
University fees will result in a drastic reduction in graduates available - but that won’t affect anyone for a few years yet and we will see many more vocational routes opening up - which might not a bad thing - how many graduate recruits have you taken on who just do not the right skills?
March and April will be the telling months of 2011 and I’m guessing it will be very tight.
Good luck all
Sean
December 10th, 2010 at 11:51 am
NO SUBSTANTIAL IMPROVEMENT IN 2011
There may be signs of minimal improvement in some parts of the manufacturing sectors, but I do not see that advancing greatly in 2011.
There is great talk of the need to increase exports by all countries in Europe, but Europe itself will be no market for increased growth as it wobbles on the point of callapse. Increased exports to the growing Eastern economies cannot be done quickly and with the rest of the world all eyeing this as the only available markets, the competition will be enormous. Also there is worry that they may be heading for their own overheating bubble.
There appears little demand for interims at the £750+ end as you say, but this is hard to call. There is plenty of pent-up need out there where companies have somehow survived the worst of the recession, but many are bumping along the bottom having financially restructured and now with higher debt, but with little improvement to their operational status or performance.
So far there has been no trigger to induce them to move significantly to get independent help to improve this by operational restructuring to make the businesses properly viable as they are now and then to put them on a new forward growth plan. As large chunks of their previous markets have vanished and will not return in the forseable future, future growth will need to be re-engineered.
One certain trigger to force underperforming businesses to take action and address performance issues, creating interim need, would be progressive interest rate rises impacting on company’s increased debts, but this is unlikely within the next 12-18 months.
The banks and private equity houses are similarly lying low with underperforming portfolios, not wanting to sell and thereby crystalise their losses, and not wanting to increase costs by investing in needed outside help. So they sit indecisive, requiring a trigger to force some action, with the world in turmoil around them adding to the waiting and watching stance. At some point the actual investors may look to find a return elsewhere, impending fund withdrawl could then itself become some form of trigger for action.
I see no immediate trigger yet visible during 2011 which might suggest hope for a significant increase in interim usage, so my best estimation is of further subdued interim activity. For interims with drained finances, 2011 will be an even tougher year!
Barry Allen of INTERAXIS, has 13 years as an Independant Transition Director within the manufacturing sectors.
December 16th, 2010 at 2:03 pm
I agree with Barry’s analysis. It’s quite sad that funds for investment are there, but going into safe bets like Gold and China (which may drive up the Yuan, and make our exports comparatively cheaper, though). Much of this indecision is about asset values: nobody wants to admit markets have gone, property won’t sell, technology is obsolete etc. Banks may not be lending but they are not foreclosing either, so endlessly “pretend and extend”. The even sadder thing is there is a lot of unused management talent that could make a difference given the chance, but so many companies seem to wait either to be sold or put in administration.
However I am not as pessimistic as some. Firstly, lower household income (unemployment) and higher expenditure (VAT, fuel) will force businesses to find a dramatically lower cost base to survive, levering strategic changes and new technology: they are going to need some help to do that.
Secondly businesses will need money from PE & VC sources, as the banks don’t have any insight into specific situations: everything they loan is a bland generic risk, backed by CDS and all the other pieces of imaginary financial mathematics that caused the problem in the first place. More colourful PE houses are starting to sprout up, and that will accelerate next year.
December 27th, 2010 at 10:47 pm
I’m of the view 2011 is going to be a very tight year for manufacturing with every step forward offset by a step back.
On the positive side I list the continuing ability of UK manufacturing to innovate one step ahead, implement lean techniques, reduce wastage and undertake cost-out projects. I also see subdued pay rises or even pay freezes in 2011, along with great options to be found on commercial property and renegotiating property terms. The increase in tuition fees and the new emphasis on apprenticeships is going to be attractive to those students who otherwise would have gone onto so-called “Mickey-mouse” degrees at university, to consider practical rather than theoretical skills.
On the negative side inflation is creeping up worldwide driven by the rising commodity prices, driven partly by Asian demand and partly by a “bubble” emerging as a home for hot money caused by QE in UK and USA. UK manufacturing which has depended on cheaper Chinese suppliers for the last decades are going to find China no longer cheaper so face the option of relocating to new countries (Vietnam, Philippines, Cambodia, India) or relocating home to UK. Increased inflation will mean increased interest rates at a time when the consumer-led recovery is not yet established. Coupled with the pay-freezes and public-sector reduction resulting in job-losses and part-time working, there is not going to be a consumer led recovery for a while. In fact the householder will see paying down debt as a bigger priority so the new car will be put off for another year.
Those for me are the certainties. What remains are what I call the tipping points to watch in 2011:
1. Euro Sovereign Debt: We need to always remember the Euro is a political project and not an economic one, the purpose being to unify the nation states of Europe into one bloc. Thankfully we in the UK are outside the Euro so have some flexibility to steer our own course of action. However as we have seen with Ireland we may find it “in our interests” to not let a member state go down, but can we really afford to also bail out the profligate southern European states and create a moral hazard that bails out countries that should have known better? I’m of the view it’s more likely the Germans will blink at the cost of bailing out Greece, Portugal and Spain; and will restore the Deutschmark because they have prior experience of the (expensive) project to assimilate East Germany. If that happens it leads to a whole set of questions being asked: what is Europe? And what is our role in Europe?
2. The rebalancing of the economy from public-sector to manufacturing: Since 1997 roughly 1m jobs were lost in UK manufacturing and 1m jobs created in public-sector. A transfer from wealth-creating to wealth-consuming that has to be reversed. The coalition government has to have the will to see through the necessary restructuring of the public sector in the face of vocal and public displays of discontent that the tuition-fees riots were a foretaste of. It will not be easy if the uneasy coalition of Conservative and Lib-Dems breaks out into open rebellion and mutiny in the ranks.
3. Clarification of the UK banks priorities: At the moment the UK banks are tasked with strengthening their balance sheets, unravelling their bad loans, while at the same time being encouraged to lend. These three factors cannot all be priorities – only one can be, and to be honest the banks have taken matters into their own hands by focussing on strengthening their balance sheets – turning down the credit available to lend, and sitting on and riding out bad loans to not make them any worse. If some-one can clarify what the priority is we can adapt accordingly and manage expectations.
Those three for me are what will distinguish 2011 from being a tough year to a bad year. As ever, we interim specialist await the call-up to serve; knowing we will do our duties to the best of our abilities for whoever employs us.