KPMG's National Business Confidence Survey
The current business climate is changing rapidly, with confidence dropping, and margins being eroded. Businesses must respond or risk facing a gloomy outlook says Malcolm Edge, head of markets for KPMG in the UK.
The scale of the credit crunch's impact now hitting home across UK regions as well as the City is severe, according to KPMG's latest National Business Confidence Survey.
Three quarters of the senior executives questioned said their business has been negatively impacted by the credit crunch and only 40 percent felt optimistic about their company's prospects for the forthcoming year, while 60 percent were looking for ways to cut costs.
The elements that are coming together – rising inflation, tightening credit conditions and plummeting consumer confidence – will make life difficult for at least the next 12 months.
The continuing rise in inflation is likely to spark increases in costs which in turn will hit businesses with the double whammy of decreasing profit margins and higher wage demands from employees facing the rising cost of living. How managers deal with the resulting squeeze from both sides will be crucial.
A 'business as usual' strategy is the wrong approach in such market conditions, when organisations need to focus on key areas and act quickly to ensure they are as well positioned as they can be when pressures really begin to bear down.
Taking steps to reduce costs and improve cash flow is sensible and could start with an interrogation of forecasts and use of working capital, to enable managers to identify key risks and opportunities within their business without the need for drastic change or reputational damage. This can involve releasing cash from a business or ensuring that appropriate controls are in place to stop any losses as a result of fraudulent behaviour.
It is easy to fire-fight rather than push for future growth. However, it is important not to lose sight of the fact that changing economic conditions can provide opportunities. For example, acquisitive organisations that are able to secure funding will benefit from power shifting in their favour as prices are driven down.
Those businesses who tackle the issues head on stand a greater chance of emerging from this part of the economic cycle in a stronger, more competitive position."
http://www.kpmg.co.uk/winwin/ is a source of practical help and strategic ideas for managers grappling with the issues created by the difficult economic conditions.