Home: Issue 7 2010 › Mounting pressure

Mounting pressure

05/10/2010 | Channel: Manufacturing

Global businesses are fearful of their ability to improve
profitability over the next 12 months, according to KPMG’s
latest Global Business Outlook study.

Conducted among 6200 manufacturers and service providers across 17 major economies worldwide, the study reveals firms’ fears over their inability to increase the prices they charge, against a backdrop of rising or static input costs.

According to British businesses, the resulting squeeze on margins will be markedly worse for UK firms than the rest of the world, the research also suggests. Martin Scott, Partner at KPMG Performance and Technology, commented: “In profitability terms, the majority of firms will be in no better position next year – indeed, many are predicting margins to contract. Without the ability to pass escalating costs on to customers, firms will struggle to grow profits over the coming year, raising serious doubts over sustained economic recovery.”

Among UK manufacturers, nearly two thirds (63 per cent) expect rising input costs, 40 per cent higher than the global average of 45 per cent. Facing pressure on margins, firms in the UK and globally must continue to manage costs tightly, while identifying fundamental changes to their operating models to drive further efficiencies. “They will also need to explore innovative pricing and bundling strategies to increase share of wallet, and we expect to see multi-nationals accelerating their push into emerging markets,” Martin concludes.