Decline in Retail Sector rates
Three years since the credit crunch started following the collapse of Northern Rock, new research reveals that the market for senior managers is weakest in the retail sector says Interim Partners.
According to the Ipsos MORI research,* daily rates for interim managers, who work just below board level on a contract basis, fell 26% in the retail sector from £952 before the credit crunch started (Q2 2007) to £706 now (Q2 2010).
The average daily rate for interims across the private sector was £757 in Q2 2010, down 1.4% from £768 in Q2 2007.
Interim Partners points out that the market for senior managers in other sectors has fared better:
- daily rates for interims in the top performing chemical, pharmaceutical and biotech sector jumped 16% over the same period from £703 to £815
- in the banking and finance sector rates dropped just 2% from £752 to £740
Retail management hit by fall in demand and supply glut but some specialists still sought after Simon Gough, Partner at Interim Partners, comments: “The market for senior managers in retail has been hit harder than other sectors by the credit crunch. Demand for managers fell sharply and a glut of top quality retail talent is oversupplying the handful of roles available. The two factors have put substantial downward pressure on fees.”
Interim Partners explains that the number of retail job cuts and insolvencies in the UK has led to an increase in experienced managers looking for work. Retailers that became insolvent because of the credit crunch include: Woolworths, Zavvi, Borders, MFI, and First Quench Retailing, the owners of Threshers.
Simon Gough comments: “Many retailers were forced into insolvency during the recession, including some major high street names. With so many managers chasing a handful of roles at the moment, there is an inevitable impact on rates that managers can charge.”
“On the demand side, retailers have reacted to weak consumer spending by putting almost all major management projects on hold to reduce costs. While other sectors have been kick-starting stalled management projects as the economy has recovered, on the whole it is only projects that deliver savings or that could not be put off any longer have been implemented in the retail sector.”
“Before the credit crunch the UK would regularly see new international retail brands setting up a UK presence. When international or UK retailers wanted to do a rapid roll-out it generated demand for experienced interims who could implement their plans. But that kind of work completely dried up during the credit crunch.”
Interim Partners points out that the last three years have seen very little M&A activity or private equity investment in the retail sector in the UK, further reducing demand for senior managers.
“Deal-making can be a real driver for management shake-ups and new hires as the buyers seek to implement their new strategic plan for the business. Before the credit crunch retail was a favourite sector for private equity but since the financial crisis started there has been very little activity.”
However, Interim Partners says that demand for specialists in procurement and cost management has been consistently strong because retailers are having to squeeze supplier costs down to maintain profitable margins.
Pharmaceutical sector – drive to increase efficiency
Interim Partners says the strong market for senior managers in the pharmaceutical sector has been stoked by demand for cost management and efficiency experts.
“As a defensive sector, pharmaceuticals have emerged from the recession practically unscathed so they can still afford to invest in high quality managers who can improve their business. They have been preparing for potential pressure from the Government on NHS spending on drugs by bringing in senior level cost-cutters to strip out any waste. They want to try to ensure that their margins hold up even if public spending cuts begin to affect them.”
“Because it is seen as a top priority at the moment these cost management experts are being hired at a much more senior level and in greater numbers than has been typical for the sector. Pharmaceutical companies are taking efficiency measures very seriously.”
Recovery in banking and financial services shores up interim rates
Andrew McIntee, Director of Financial Services at Interim Partners, says that is a testament to the recovery of the sector that rates for interim managers at banks and other financial institutions have held firm in comparison to other sectors.
Andrew McIntee comments: “The credit crunch was fundamentally a banking crisis, but now banks are posting healthier profits and are moving back to growth mode which generates increased demand for interim managers.”
“Many banks are also investing heavily in large scale integration programmes after the spate of mergers during the credit crunch. That is leading to increased appetite for interims with experience of implementing cost saving efficiencies.”
Research by Ipsos MORI for the Interim Management Association.
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