Recession is catalyst for decade of business change
THE recession has raised concerns about commercial models, supply chains and finance that will reshape business behaviour well into the next decade, according to the Confederation of British Industry (CBI).
Launching its report ‘The Shape of Business - The Next 10 Years’ at its annual conference on Monday, the business organization said that the recession and credit crunch had become the catalysts for a new era. The report flags four key areas of UK business where fresh approaches will develop because of the downturn:
‘What we now need is a more balanced, less risky pathway to growth – one in which the short-term returns may be lower, but the long-term rewards for management success will be a lot more sustainable and secure.
‘There are important questions around how businesses are going to finance growth and investment in the future. And in a more-collaborative, less-transactional world, closer relationships with customers, suppliers, employees and shareholders look like becoming the new norm.’
In a recent survey of business leaders, more than half (55%) said they would now only tolerate a lower level of risk from gearing and, within that group, 70% said an economic recovery would not reverse their position. Two thirds (68%) expect no improvement in credit availability in 2010 and are reshaping their business financing accordingly: 50% said they would use less bank debt; 44% said they would rely more on equity finance; and 26% said they would make more use of bond issuance.
‘Firms looking to reduce risk and acknowledge their interdependence are seeking more collaborative ways of working through partnerships and joint ventures. Perhaps we will see a flourishing of supply chain finance – in which firms with the largest, most solid balance sheets help finance their smaller suppliers or customers,’ said Mr Lambert.
‘Businesses want to adapt to a harsher credit climate by finding new sources of funding. Why not encourage new forms of institutions to finance the growth of small and medium-sized enterprises through equity and debt? And why not make it easier for companies to raise money locally, perhaps through new regional banking and investment institutions, rather than having to rely on a few very big players in London and Edinburgh?’
Launching its report ‘The Shape of Business - The Next 10 Years’ at its annual conference on Monday, the business organization said that the recession and credit crunch had become the catalysts for a new era. The report flags four key areas of UK business where fresh approaches will develop because of the downturn:
- Businesses do not see credit terms falling back to pre-crunch levels and, having become wary of higher debt levels, firms will look to alternatives to debt-driven growth to protect investment and innovation. More financing options will be created and deployed.
- Companies will reorganize and re-examine their approach to working with partners – from suppliers to universities, and even competitors. Ongoing concerns over a ‘domino effect’ of supply chain failures and issues around trade credit insurance will compel firms to forge more collaborative supplier relationships.
- Sustainability and ethics will become more integrated into the business model. Firms will seek to improve accountability and corporate citizenship further to attract and retain customers and staff.
- A more flexible workforce will evolve, assisted by developments in technology and training, and building on the spirit of collaboration between employers and staff which has grown over the recession. For some firms that might mean a smaller core workforce and a larger ‘flexiforce’.
‘What we now need is a more balanced, less risky pathway to growth – one in which the short-term returns may be lower, but the long-term rewards for management success will be a lot more sustainable and secure.
‘There are important questions around how businesses are going to finance growth and investment in the future. And in a more-collaborative, less-transactional world, closer relationships with customers, suppliers, employees and shareholders look like becoming the new norm.’
In a recent survey of business leaders, more than half (55%) said they would now only tolerate a lower level of risk from gearing and, within that group, 70% said an economic recovery would not reverse their position. Two thirds (68%) expect no improvement in credit availability in 2010 and are reshaping their business financing accordingly: 50% said they would use less bank debt; 44% said they would rely more on equity finance; and 26% said they would make more use of bond issuance.
‘Firms looking to reduce risk and acknowledge their interdependence are seeking more collaborative ways of working through partnerships and joint ventures. Perhaps we will see a flourishing of supply chain finance – in which firms with the largest, most solid balance sheets help finance their smaller suppliers or customers,’ said Mr Lambert.
‘Businesses want to adapt to a harsher credit climate by finding new sources of funding. Why not encourage new forms of institutions to finance the growth of small and medium-sized enterprises through equity and debt? And why not make it easier for companies to raise money locally, perhaps through new regional banking and investment institutions, rather than having to rely on a few very big players in London and Edinburgh?’
