‘Toxic’ recession continues

Posted on 27 Apr 2010 by The Manufacturer

The recession has created a toxic environment for business in construction and manufacturing, according to a report from Lord John Eatwell and published by the Chartered Management Institute.

CMI’s Economic Outlook report, which tracks business confidence amongst the UK’s senior executives, reveals that the recession is still negatively impacting on 86% of construction and manufacturing businesses, and shows that job insecurity is at record levels. Despite signs of fledgling economic recovery, 48% of managers maintain that their business operations remain severely hampered by the effects of the recession.

The result is a fragile and frugal business environment, which has the potential to delay the UK’s recovery still further. Unsurprisingly, levels of morale have worsened compared to six months ago, according to 72% of organisations in construction and manufacturing.

Even though official figures suggest that the UK has pulled itself out of the slump, the reduction in availability of long term finance, as experienced by 35% of business leaders, in combination with reduced short term investment (affecting 31%) has forced construction and manufacturing managers to continue to make tough choices when looking for ways to keep costs low.

Almost two thirds (64%) of construction and manufacturing organisations have kept pay freezes in place and 58% have closed their doors to new recruits, despite assertions by some experts that the jobs market is steadily improving.

Lord John Eatwell, chief economic adviser to CMI, said: “The economy is growing, albeit at an anaemic 0.2 per cent, but the promise of recovery is not enough to sustain our businesses while they wait for the situation to improve. Practical help and support is urgently needed. Managers are integral to driving our recovery, but their efforts are being hampered by a lack of available finance and poor levels of employee morale. If they are to turn the situation around, then Government help is urgently required.”

Despite the gloomy outlook, CMI’s research reveals that British managers have some optimism about business prospects over the next three years. Yet even this net optimism score of +35 is lower than a year ago (+56). It is also far worse in the public sector where, facing the threat of cutbacks from all political parties, a net score of minus 30 has been recorded.