In the second blog of the week on our 2015 Executive Survey, we look at companies’ plans and expectations for their own businesses in the year ahead.
Manufacturers expect growth in the UK and industry in the year ahead – but are less upbeat than this time a year ago. And as we will discuss on the blog tomorrow, there are still plenty of potential risks on the horizon.
Changing conditions, shifting strategies
In response to this shift in the outlook from last year we investigated the strategies companies are putting place in response to a patchwork of opportunities, risks and uncertainties.
These strategies fall into three broad groups – efforts that can differentiate companies from competitors; improvements to production processes and supplier relations and entry into new business areas.
New products backed with new investment in marketing
% of companies adopting strategy in 2015
Coming out on top are strategies which can enhance manufacturers competitive position in the market by bringing new product offerings to their customers and by raising the profile of their capabilities through increased marketing and branding activity.
Our survey shows that this is a priority right across the supply chain with over half of medium and large companies, and over a third of small companies launching a new product or service in the year ahead. Similarly, the importance of generating business with innovative new products is pervasive across manufacturing sectors, with this priority featuring in the top three across all sectors with the exception of metals.
Other business activities will all require additional investment in the next 12 months. Over a third of manufacturers will be investing in new manufacturing capacity in 2015, in part to continue catch up on relatively low levels of investment in the post-crisis years and also to scale up production for new product launches.
While some of the main components of manufacturers’ business plans in the year ahead are aligned with the reality of a less vibrant global outlook. Companies are currently facing a balance of decisions on to deploy resources against expectations of slower profitability improvements and have opted for improvements in current activity versus entry into new areas.
A positive pay out from firm-level efforts
There is still some confidence that manufacturers will continue to grow their business in the next 12 months. As chart shows, the balance of responses on all our firm-level indicators remains positive for 2015.
Sales, Productivity and Employment set to grow
% balance of companies
Largely unchanged from the position a year ago is the upbeat view from a majority of manufacturers on productivity improvements in the year ahead. Seven in ten companies expect to see their efforts to drive through efficiency improvement deliver moderate gains in 2015.
Similarly the balance of companies reporting plans to continue recruiting in the next 12 months remains firmly positive at 40%, only slightly down on last year’s 42%. It is clear that manufacturers will maintain a preference of permanent employees to meeting their growing skills requirements.
However, the firm-level indicator that stands out this year is the relatively weak picture on profitability. Only a net balance of 7% of manufacturers is planning for higher profit margins this year, down some 30 percentage points from last year.