And now some good news

As people's focus shifts to recovery, pundits are considering how the shape of industry and business will or should alter. The CBI has spelt out one vision, which is contained in a recent report: 'The Shape of Business – The Next 10 Years'. The recession has raised concerns about commercial models, supply chains and finance that will reshape business behaviour well into the next decade. The recession and credit crunch have become catalysts for a new era, the CBI offered. The report flags up 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 reorganise 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 that has grown during 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," said Richard Lambert, CBI director-general. Many of the report's findings are supported by a new survey conducted by Ipsos MORI in October and November, and sponsored by the CBI and business advisory firm Deloitte. The survey of business leaders, mostly CEOs and chairmen, and representing a UK workforce of almost 1 million and a global turnover of around £1 trillion, revealed a shift in attitudes towards financing and supply chains. More than half (55 per cent) said that they will now only tolerate a lower level of risk from gearing and, within that group, 70 per cent said an economic recovery would not reverse their position. Two thirds (68 per cent) expect no improvement in credit availability in 2010 and are reshaping their business financing: 50 per cent said they would use less bank debt, 44 per cent said they would rely more on equity finance, and 26 per cent said they would make more use of bond issuance. And when asked about supply chain fragility during the recovery, only 24 per cent said that they are not concerned. Sixty-eight per cent of firms said they would be strengthening the level of partnerships with suppliers in the coming years. One in three said they would be increasing their number of suppliers. And around one in five said they would be offering finance to key suppliers, reducing dependency on 'just in time' processes and shrinking geographic distances to suppliers. So, a focus on the longer term, increasing supplier numbers and shrinking geographical distances to them, plus a strengthening of partnerships with them – just maybe, UK sub-contractors have cause for some celebration, should these intentions turn into reality at large, that is. First published in Machinery, December 2009