UK tops global pessimism charts

The Bank of England recently published a pessimistic recovery assessment

Pessimism is still running high within the UK economy according to the latest research from KPMG.

Research released by the market watcher revealed that half of global businesses surveyed expect a recovery next year, but UK businesses on the whole felt that recovery would not happen until 2011.

KPMG interviewed 852 senior decision makers, representing companies from 29 countries with turnover of between $250bn to $5bn.

Taken collectively, eight out of ten respondents predicted recovery by 2011, with 11 per cent claiming recovery would come in 2009. A total of 51 per cent picked 2010 and 22 per cent predicted 2011 as the year for recovery.

Sue Bonney, head of tax at KPMG Europe, said: “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 stock market 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.”

Interestingly the findings discovered a gap between Asia Pacific companies and their European counterparts – with nearly 90 per cent of businesses in Japan and 84 per cent of firms in Singapore planning radical changes to their business models in the next decade. In India, the figure was 72 per cent and 66 per cent in China.

However, in Europe the figures were slightly lower. Just 20 per cent of firms in the Czech Republic and the Netherlands were planning major changes, rising to 25 per cent in Hungary and 42 per cent in the UK. The highest figure in Europe was Ireland, with 63 per cent of respondents expecting radical change.

Bonney added: “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.”

Results also revealed that cost control was a priority in the short term, with more UK firms having plans for specific cost control measures than their global counterparts, with almost twice as many UK companies planning to reduce headcount.

A total of 88 per cent of UK respondents said they planned to reduce procurement and supply chain costs, against 67 per cent globally; 84 per cent of UK firm planned to optimise business processes compared to 64 per cent globally, and 74 per cent were planning staff cuts, compared to 41 per cent globally.

Bonney concluded: “While 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.

“While 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.”