Exploratory Survey (Draft Copy) Current Challenges and Issues in the North of UK Summary of challenges, major findings and results
Table of Contents 2 Framework of the research Overview of the sample Summary of the findings Regional Trends vs. Global Trends Conclusions and Opportunities EVALUATING CHANGE AGENDA
Framework of the research | Purpose and objectives PricewaterhouseCoopers & Lancaster University Management School Project by To understand the challenges faced by major regional businesses and how they are responding to these challenges Project purpose
to identify key business issues faced by the companies in North of England
to understand how the companies are planning to deal with the key challenges and issues
Framework of the research | Participants and supporting organisations
Interviews were conducted with 2 people
Total number of survey respondents: 38
Total completed surveys: 30
Framework of the research | Analysis overview 1 2 3 4 Identifying the top challenges and mapping it with initiatives taken by majority of organisations in North England to counteract those challenges Understanding the data obtained in the survey by breaking it down by industry type, organisation revenue, employees etc Analyzing data by comparing challenges, initiatives and trends w.r.t. organisation’s size, function, revenue, operations etc Comparing challenges and trends of organisations in North England with Global, UK and North American organisations (using PwC Global 2010 CEO report)
Table of Contents 6 Framework of the research Overview of the sample Summary of the findings Regional Trends vs. Global Trends Conclusions and Opportunities EVALUATING CHANGE AGENDA
7 Overview of the sample| Industries, turnover and growth Q A2: What was the level of turnover of the business in the last financial year? Q A1: In which sector is your main business? Turnover Industries Q A5: What was the annual turnover growth of your business for last 3 years? Growth More than 75% of responses came from 5 sectors: Industrial Products, Telecoms & Technology , Retail & Consumer Goods, Education and Energy Utility with 11 companies having turnover > £100M
8 Overview of the sample| Industries, sizes and growth Q A3: Apart from UK, in how many countries do your company own offices? Q A4: How many total full-time employees work in your company? No. of Employees No. of Offices % of Respondents % of Respondents More than 50% of the respondents have less than 250 employees and more than 40% have international offices
9 Overview of the sample| Top Challenges Faced by the Businesses On ground level, organizations are still apprehensive about recession and future growth Most Organisations are expecting changes to the regulatory environment in future Even though ‘Threat of Recession’ , is still prominent, organizations have actively started looking at retaining and attracting talent.
Overview of the sample| Top Initiatives considered by the Businesses “To continue to increase our product and market offering and to increase sales at home and abroad. To maintain as far as practicable our current level of employees given our dependency on public sector contracts.” The new mantra for CEOs in coming months in Growth - Look for aggressive growth through acquisition, new products, channels & markets 10
Quotes | Organizational vision for next 12-18 months In their own words.... “Taking into consideration the new coalition government are introducing £6.2 billion of cuts, there is to be a review of departmental spending, VAT will probably rise and a review of BSF and NHS projects is expected in October. We will no doubt see more refurbishment opportunities and we need to be geared up for it. We need to have a small build team who can also deliver the greening initiative and establish relationships with key clients and potentially open doors on bigger contracts” Construction company with revenue > £500m To capitalize on current relationships and opportunities through repeat business and ancillary projects with clients. To undertake business development to deliver existing services to additional clients. To network to develop new contacts and develop new services. “To return business to growth having had a couple of years with flat volume/ revenue performance. To do this through new business and new product opportunities.” Retail and Consumer goods with revenue > £500m and more than 1000 employees Education Industry 11
Quotes | Organizational vision for next 12-18 months “Survival with more overhead cuts until the government announces its comprehensive spending review which hopefully will then lead to confidence for public and private spending on capital projects. We are redirecting our business towards smaller refurbishment projects and surveys rather than seeing many large and new projects. Following direction from the government it is likely that work may begin to filter through in 6-12 months after which there could be more confidence from developers and the private sector to invest at which point we may return to fuller order books, back to 5 day working followed by growth in 18 months. In the meantime our Asia market is likely to continue to grow and financially contribute to UK costs” Education sector “Reorganize two sectors into one, innovate in our markets to keep/grow share and keep cost tight” Glass Distributor 12
Table of Contents 13 Framework of the research Overview of the sample Summary of the findings Regional Trends vs. Global Trends Conclusions and Opportunities EVALUATING CHANGE AGENDA
Summary of the findings | Trend - Growth Trend 1: Growth: UK CEO’s plan to continue their focus on reducing costs, with growth being funded by internally generated cash Q C1: How confident do you feel about the next 18 months in terms of delivering sustainable growth? (5 being very confident and 1 being least) Q C2: How do you intend to drive growth of the business in the next 12 - 18 months? Tick top 3 in order of importance: 77% of organisations with revenue < £50M feel quite confident of their future growth as compared to 36%of organisations with revenue > £50M 14
Summary of the findings | Trend - Growth Q C3: In which area do you plan to increase investment in order to tap the opportunity for growth? Organisations are planning to invest in Products & Services,byimproving their Marketing Techniques and using Technology toimprove their product line 15
Summary of the findings | Trend - Growth How are the business sectors planning to drive growth of their business in coming months? Industrial Products sector is planning to introduce some costreduction measuresand planning to penetrate existing/emerging markets Retail and Consumer Goods sector is planning to penetrate existing markets and diversify their portfoliothrough M&A Telecoms and Technology sector is planning to penetrate existing markets with diversificationand taking measures formargin protection (margin leakage) Business sectors are planning to develop & improve their existing products and services and devising new strategies themselves for increasing their market share 16
Q C4: To what extent have you been impacted by recession driven changes in consumer behaviour? (5 being significant impact, 1 being no impact) Organisations with revenue <£50M 42% were significantly impacted 36% with low impact Organisations with revenue >£50M 20% were significantly impacted and 33% with low impact 17 Summary of the findings | Trend - Changing face of Consumer Trend 2: Changing face of consumer: UK consumers are saving more and spending less, reassessing their perception of value and trading down Organisations with Global presencewere less impacted (only 21%) while regional companies (UK only) were significantly impacted (55%) by recession
18 Summary of the findings | Trend - Changing face of Consumer Q C5: How will you stay close to the changing needs of the customer? organisations with Revenue <£50M are planning to improve/refresh their existing products and services organisations with Revenue >£50M are planning to invest in adding new product lines within their existing products and services
Summary of the findings | Trend – Talent Culture Trend 3: Talent Culture: Success in 2010 will in part be dependent on how companies motivate, manage and reward their talent pool. Q C6: To what extent do you anticipate changes in strategies and investment for managing talent Q C7: In next 12 – 18 months, what are the strategies which the organisation is likely to adopt for talent management? (Tick 3) 71% of organisation anticipate ‘some change’ in talent management strategy. In next 12-18 months, majority of organisations will add new employees and focus on ‘non-financial’ incentives for existing employees.
Summary of the findings | Trend – Talent Culture Talent Culture : Analyzing the difference in talent management strategies based on their size Large organizations (>£50M) SME (<£50M) Quotes “Improved performance from existing employees” “We need to revert to full time working to improve financial packages as a priority to retain staff and reduce the risk of them leaving for higher remuneration elsewhere when the market recovers. Staff are loyal and succession planning is a helpful way to tie staff in for the long term” Senior management executive of a large organisation 20 SME Owner
Summary of the findings | Trend – Operations Trend 4: Operations: Operating model continues to be changed due to dynamic economic situation. Q C8: In light of the impact of change drivers already highlighted, does your current business operating model fit the needs of your customers? Q C9: Please highlight the areas in which you expect to shift your operating model ?
Based on the changes made during recession, organisation have started getting a grip on their operating model.
93.5 % organisations consider their current business model will fit their customers need with high confidence on the degree of flexibility
Some areas where organisations feel they might need to slightly change their model include procurement, supply chain and marketing.
22 Summary of the findings | Trend – Operations Operations: Analyzing the confidence in the current business model based on various parameters 50% of large organisations with revenue > £500M feel quite confident in their current operating model as opposed to 87.5% by SMEs with revenue < £10M Q C10: How flexible/scalable is your current business model in order to respond to the changes? (5 being very confident and 1 being least) 66% of organisations who are present only in UK feel quite confident about their current business model ‘Confident’ is defined as rating of 5 or 4 Quote “Traditional industries had already become lean by late 90’s and the recent recession has helped them in further optimizing their operating model and removing a bit of slack. This is the first time service sector has got effected and hence the reason for big job losses” Executive, UKTI
Summary of the findings | Trend – Sustainability Trend 5: Sustainability: Climate change has raised its position on CEOs agenda despite recession Q C11: Do you plan to change your investment in Sustainability & Climate Change (S&CC) initiatives over the next 12 months Q C12: Which of the following are key drivers for investment in S&CC Organisations look for investmentsin ‘Sustainability and Climate Change’ initiatives as a mean to achieve ‘Competitive advantage’. This rates even higher than other drivers like ‘Compliance’ and ‘Carbon reduction’ which are usually looked upon as the primary reasons for investment in S&CC 23
Summary of the findings | Trend – Sustainability Sustainability: Analyzing organisational drivers for investments in S&CC based on parameters like revenue and countries of operation Revenue > £100M Revenue < £100M UK only presence Global presence Complianceis NOT one of the main reason globally Compliance is one of the main reason for S&CC investment 24
Summary of the findings | Trend – Legislation Trend 6: Legislation: CEOs expect changes to the regulatory environment in future which may drastically change their current strategies and competiveness Q C13: What, if any, new legislation is likely to impact your business? “Mandated open access of government funded research” “European consumer credit directives, changes from FSA to Bank of England for regulation, general increased protection for consumers against banking practice and fees” “ Ours is a government funding organisation and we are dependent on government legislations” CEO, Research Company Executive, Retail and Commercial Banking Director, Govt. funded organization Senor Executive, Construction Industry “Government regulation on sustainability and public/private finance rules” “Carbon reduction agenda” “Introduction of Academies and reduction of LA influence” Executive, Construction Material Executive, Training & Consultancy Sector Area Manager of Industrial products industry 25 “Banking reform”
Summary of the findings | Trend – Location Location: Q C14: Which of the following socio-economic factors contribute to your choice of location in the North of England? Historic location of founding company Strong links to local community Location constraint due to specific nature of business The top tworeasons for companies to be located in North of the UK are : History – Parent company based here for many years Proximity to customers – Local loyal customers “The positives for NW are cheaper cost base, and less mobile workforce while negatives being getting high end skills. NW is predominantly seen as a industrial centre than a service centre hence it is difficult to hire specialized professionals like Legal” Director, Government organisation 26
Table of Contents 27 Framework of the research Overview of the sample Summary of the findings Regional Trends vs. Global Trends Conclusions and Opportunities EVALUATING CHANGE AGENDA
Regional trends vs. Global trends | Top 5 challenges Global UK North England Protracted recession / availability of credit Protracted global recession Exchange rate volatility Government policy change Over regulation Over regulation Lack of stability in capital markets Availability of talent / key skills Macroeconomics imbalances (e.g. trade or fiscal) Changes in consumer behavior Protectionist tendencies of national governments Protracted global recession Inadequacy of business infrastructure Inflation Lack of stability in capital markets 28
The top challenge which organisations in North England face is the ‘Protracted recession / availability of credit’ which is totally aligned with global challenge but surprisingly not aligned with challenges which UK sees.
The challenge of getting talent/key skills ranks very high for the region as compared to global concerns where it does not even rank in top 5
Regional trends vs. Global trends | Focus area next 12 months Global % Opportunities for business growth Better penetration of global markets Strategic alliance / Joint venture Cost reduction initiative Restructuring Activities % North England Penetrating of existing markets Penetrating emerging markets Cost reduction initiative Opportunities for business growth (Top 3) 29
Regional trends vs. Global trends | Climate change initiatives North America North England Western Europe Reputation advantage Competitive advantage Reputation advantage Reduce emissions for the company New product and services Market opportunity Benefit from government fund / financial incentives New product and services Reputation risk Compliance Compliance Compliance
Reputation risk is the top reason for CC&C initiatives in North America/Western Europe
Government benefit features high in North America
Competitive advantage prime reason in North England
31 Regional trends vs. Global trends | Recession Impact-Industry wise Global North England Energy utilities and mining seem to have been impacted less in North England as compared to global trends
Table of Contents 32 Framework of the research Overview of the sample Summary of the findings Regional Trends vs. Global Trends Conclusions and Opportunities EVALUATING CHANGE AGENDA
33 Conclusion | Overall survey finding’s What are the top Challenges? What are the business organizations doing? Companies are: Refreshing existing products & services Introducing new products and & services Staying disciplined on cost by creating short term strategies 1 2 Dialogue and closer working between business and government Ensuring compliance with relevant legislations Assessing regulatory risks 3 Business Organizations are investing in: Assessing talent pool and adding new employees Investing in training, focusing on organic growth by encouraging leadership development 4 People are investing in S&CC to: Gain competitive advantage Grab market opportunities Maintain Reputation
34 Conclusion | Our take Cautious optimism is the path taken by most of the organizations today in North England. Organizations which move early and have a concrete growth strategy will benefit the most in the post recession scenario. Organizations need to tap in to new markets, products & services while still being prudent in their costs. Organizations need to closely watch their talent acquisition and development strategy in the wake talent war which may be round the corner.
Contact details For further information on the survey content or research methodology, please contact: For further information about PwC and its involvement in this study, please contact: Steve Crow Tel: +44(0) 7841 498 678 E-mail: email@example.com Thomas Davies Tel: +44 (0) 7770 456 002 E-mail: firstname.lastname@example.org Carolyne Livesey Tel: +44 (0) 7841 782 887 E-mail: email@example.com Sandeep Gupta Tel: +44 (0)1524 510752 E-mail: firstname.lastname@example.org Praneet Ashtputre Tel: +44 (0)1524 510752 E-mail: email@example.com 35