Half of the UK’s employers have the “wrong strategy” for the economic slowdown, new research has revealed.
A study from global consultancy Hay Group revealed that 51% of businesses admit they have been caught out by the credit crunch downward economic spiral.
The Hay Group report, Fight or Flight?, of 120 business leaders in the UK, exposes a startling lack of forward planning for changing economic cycles. According to the research, firms have been preparing for a slowdown for just 10 months on average – the point at which the credit crunch hit.
Under one-third (27%) of business leaders confess they have only been preparing for the past six months, while 18% admit they have just begun. More than one-quarter (26%) have made no changes whatsoever to their strategy in the light of the new climate.
Of the one in five (18%) companies that have developed a strategic response to the economic turmoil, nearly half (46%) concede their company will be too slow to implement it.
Russell Hobby, associate director at Hay Group, said: “British businesses have been caught out by the downturn – and now risk missing the recovery too. Business leaders must recognise that it will not be business as usual after the current economic strife. Planning for the recovery starts now.”
UK business leaders have forecast that the slowdown will hit profits by 1.3% on average over the current financial year (2008-09) – a fall equivalent to £900m across the economy.
Larger companies with more than 1,000 employees expect to be hardest hit, with profits predicted to slump by 2.2% on average.
“Only firms with agile business models will stay competitive in both downturn and recovery. Now is the time to acquire talent, market share and customers from weakened competitors, and maintain bullish investment in research and development to leapfrog those who have lowered their sights,” Hobby warned.
Other findings from business leaders that took part in the survey:
- 42% believe their firm cannot accurately forecast economic cycles.
- 49% cite pressure for short-term results from shareholders.
- 24% cite an overly risk-averse board among the factors impairing their firms’ long-term strategic response to the slowdown.
- 46% cite their leadership team’s lack of experience of managing in a downturn as a serious threat to their business.
- 45% confess to lacking the vision required to lead companies through economic turbulence.