It is so easy to be led into a sense of impending doom by dire economic predictions, news of soaring inflation, looming redundancy and the like, when our assumptions are necessarily based on headline figures and sound bites. Of course, there are a number of ‘checks’ taking place in the system right now – the housing and credit markets being prominent among the sectors most affected in recent months; some might agree that it is probably high time for such checks. Fuel inflation, too, is a considerable worry, as it has far-reaching consequences for all sectors of our economy. But is ‘shortage’ at the heart of this sudden and painful excursion in oil prices?
The global oil industry tells us that we are still decades away from the point at which we must seriously face up to the finite nature of our fossil energy resources. As yet untapped oil reserves in Siberia are alone estimated at 200 billion barrels. The region could eventually outrank Saudi Arabia as the world’s biggest oil supplier. Yet Russian oil production is actually declining. And the reason for this anomaly? Simply a lack of investment, we are told. Oil stocks and refined products are in short supply thanks to stagnant investment in production and refining capacity throughout the world - all somewhat exacerbated by increasing demand from the booming Asian economies. The commodity market speculators are having a ball.
The greener among us might applaud the upward spiral in oil prices; it certainly focuses the efforts of governments, their agencies and the rest of us to look toward more sustainable forms of energy production. But even this is beset by problems. Attempts by the US government to boost production of bio fuels, for example, has had a huge negative impact on world food prices, and the environmentalists are also unconvinced about the worth of bio fuel production and its carbon neutrality.
So, is recession a likely outcome? Digging beneath those screaming headlines, there are still good news stories to be had. Of particular note on the home front is a survey published last week by the Engineering Employers Federation (EEF), which asserts that high-performing manufacturers are “puncturing perception” of an industry downturn. The report – ‘Modern Manufacturing – the High Performers’ – contains an analysis of the top-twenty high-performing sectors within UK manufacturing and highlights the strengths of these enterprises. It paints a reassuringly optimistic picture of UK PLC in sectors as diverse as aerospace and pharmaceuticals, suggesting that reported growth rates exceed those of their equivalents in Germany and France.
The EEF’s analysis, which was undertaken in partnership with accountancy firm, BDO Stoy Hayward, also adds weight to evidence that manufacturers are reaping the benefits of growing world trade by adopting a range of strategies for success. These include technology-driven responses to globalisation, in addition to innovations in process, design and services.
EEF chairman, Martin Temple hails the report as the “final nail in the coffin of the myth” that manufacturing is in decline. The reality, he says, is a dynamic, innovative and increasingly high-value sector that is competing successfully across the globe. Mr Temple notes the diversity of activities that, in his words, are “thriving”. In addition to the clear successes of our pharmaceuticals and aerospace industries, notable achievements have been reported from sectors producing scientific and medical instruments, mechanical equipment and even basic metals. And some 40% of companies from these sectors say that exports are now accounting for more than half of their turnover.
But for every silver-lined cloud there’s a densely black one looming over the horizon. The Forum of Private Business, which represents some 25,000 small enterprises employing over half a million people, warns that the credit crunch is poised to inflict more pain on this sector. The gripes are predictable enough; according to the Small Enterprise Research Team survey, 88% of small businesses say the government does not understand them well enough to regulate effectively and the majority spend far too much time on paperwork and unravelling health & safety red tape. These “barriers to growth” aside, there is a worrying trend emerging that is seeing the sales expectations of small firms plummeting to a six-year low.
With worsening economic conditions and the fall in consumer confidence, small firms are warned to prepare for tougher times ahead. Adaptability and speedy response to changing markets were always aspects of small business that we were led to believe placed them apart from their much larger peers. If the EEF’s survey is to be believed, big companies have managed to shed the inertia that so dogged big business in the past. Can small companies compete as successfully in the current environment?
So, what are we to make of such conflicting views? Of course, time will ultimately tell, but at present it seems you takes your money and you makes your choice.
Les Hunt
Editor
Do you have any comments to make on this or any other subject covered in these newsletters? We are always pleased to receive feedback from readers; simply email les.hunt@imlgroup.co.uk.
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