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Global Businesses Predict Recovery In 2010 But Uk More Pessimistic

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Global businesses predict recovery in 2010 but UK more pessimistic, according to KPMG survey

UK businesses predict recovery in 2011 – later than global sample

Asia Pacific enterprises most advanced in post-recession planning – more likely to adopt radical new strategies than UK peers

Half of global businesses expect a recovery next year, according to research by KPMG International. And taken collectively, over eight out of ten respondents predicted recovery by 2011 as 11 percent said recovery would come in 2009, 51 percent said 2010 and 22 percent predicted 2011.

UK businesses were more pessimistic than the global sample as a whole, predicting recovery in 2011, later than European peers such as Germany, Italy and Spain, who all forecast 2010.

For half of the businesses surveyed, the economic downturn is prompting a change in strategy, with changing customer buying habits and cashflow pressures cited as the main reasons for this. Businesses in the Asia Pacific region said they were more likely to adopt radical new strategies in response to the downturn than those in Europe and the UK.

In what KPMG believes to be one of the most comprehensive surveys to date of global businesses’ views on the recession, 852 senior decision makers were interviewed, representing companies from 29 countries with revenues ranging from US$250 million, to over US$ 5 billion.

Sue Bonney, Head of Tax at KPMG Europe, commented: “Our research reveals the truly seismic scale of the impact of the current global recession on businesses around the world. Although commentators, encouraged by a stockmarket rally, are detecting ‘green shoots’, UK business does not expect a recovery until 2011. This is in line with the pessimistic assessment published by the Bank of England recently and the earlier findings of the IMF that financial crises lead to long drawn out recessions. What’s clear from our survey though is that many companies are facing a radical overhaul of their corporate strategy to reflect the rapidly changing world.â€

Key findings

Half expect recovery in 2010 but UK more pessimistic, expecting it in 201

Globally, 11 percent of respondents expected recovery to come in 2009, 51 percent expected to see it in 2010 and 22 percent in 2011. In the UK, the consensus was that it would be 2011 before we would see any recovery.

Recession prompts strategy changes – but Asia Pacific business more likely to adapt than European enterprises

Half the overall global sample said they planned a radical change in strategy as a result of the recession. However there were marked contrasts between the various geographic regions. Nearly 90 percent of businesses in Japan and 84 percent of businesses in Singapore were planning radical changes to their business models in the next decade. In India, the figure was 72 percent and in China it was 66 percent.

In Europe the picture was different with far fewer companies planning such radical changes. The lowest percentage was among companies in the Czech Republic and the Netherlands where only 20 percent were planning major changes to their businesses, rising to 25 percent in Hungary and 42 percent in the UK. The highest proportion in Europe was Ireland where 63 percent expected radical change.

Sue Bonney commented: “The question clearly arising from these results is why are European businesses so less likely to plan radical changes than their peers in the Asia-Pacific region. It may be that European enterprises are more mature, more entrenched and may perceive change to be too difficult.

“Indeed for some businesses such as manufacturers with complex, bespoke plant, radical change may well be a major challenge. The results do, however, suggest that it could be the Asia-Pacific businesses that make a virtue out of necessity and adapt to survive in the post-recession world. European enterprises run a risk of being left behind.â€

Cost control measures planned in all global businesses, but especially among UK companies

Understandably in the current climate, cost control was a priority in the short term. More UK respondents had plans for specific cost control measures than the global sample as a whole, with almost twice as many UK companies planning to reduce headcounts than their global peers.

88 percent of UK respondents said they planned to reduce procurement and supply chain costs against 67 percent globally; 84 percent of UK respondents planned to optimise business processes (by automation for example) against 64 percent globally; and 74 percent of UK respondents had headcount reductions planned against just 41 percent globally.

Sue Bonney concluded: “Whilst the UK shares the global view that recovery is in sight in the medium term, our results suggest that British businesses are more pessimistic than their global peers and that more are braced for more pain to come in the form of cost control measures to get through the downturn. Whilst short to medium term survival is clearly of critical importance, adapting to the changing commercial world is also crucial and UK businesses will need to consider their longer-term strategies for the post-recession environment.â€

We are at 2009 Q2, therefore we are quite a long way off from a predicted recovery folks.

Edited by cashinmattress

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