Savvy UK Manufacturing Plc outsmarts the recession, PwC report shows

Britain's UK manufacturing industry is outsmarting the recession and the stock market, according to a new report by PwC. As other sectors, including the financial sector, struggle to ride the ongoing recession, PwC's 'From Crisis to Growth' report shows that not only has UK Manufacturing Plc's share price index trebled since 2009, but anyone who had invested would have doubled their money over the past five years.

PwC also found that when recession strikes, companies tend to focus on eight key areas to survive including scenario planning, supply chains, R&D and focusing much more on the customer.

Clive Penwarden, Industrial Manufacturing partner at PwC, said:  "This new research has supported our positive view of how the UK Industrial Manufacturing sector is performing.  We first looked at these companies in 2010 to see what strategies they were implementing to deal with the impact of the recession and found they weren't just reducing their costs like many sectors in the UK were doing, they saw the financial crisis as an opportunity for growth – and that's what they did."

PwC has just finished its analysis of how some of the UK's leading industrial manufacturing companies have fared financially since the last recession and how they have performed, compared the findings against the FTSE 250 prior to the recession.

Firms analysed include Senior Plc, which has a base in Hertfordshire, Renishaw, Berkshire-based advanced materials group, Morgan Crucible and Melrose, which acquires and invests in manufacturing businesses.  

Prior to the recession, gross margins topped 35% in 2008 and EBITDA margins were circa 18%, dropping to 16% in 2009 as the recession hit. However, adopting the strategies in the report, EBITDA in these firms shot back up to 21% last year and gross margins stood at 37% - higher than in 2007.

Clive Penwarden, Industrial Manufacturing partner at PwC, said:  "The businesses we looked at restructured, re-strategised, became agile and flexible and looked to emerging markets for future growth. The strategies they implemented were not only crucial for survival, they have proven to be sustainable. With revenues showing an average year on year growth of 9% and 16% in FY10 and FY11, and 2012 looking similarly positive, perhaps other sectors should be learning from their success."

When measured alongside global export growth to emerging markets, the UK still has some way to go to catch up with its peers, but recent financial performance of the UK manufacturing industry suggests it is in strong shape to regain some of this loss.

Andrew Sentance, Senior Economic Adviser at PwC, added: "This is a great time of opportunity for manufacturers, and this report shows that UK companies are really rising to the challenge. Growth in Asia and other emerging markets is providing significant new export potential, offsetting the more disappointing performance in some parts of the euro area.

"We have many successful, highly innovative and well managed manufacturing companies here in the UK – though perhaps just not enough of them."  

1.  PwC analysed the following UK companies in 'From Crisis to Growth': Bodycote Plc, Charter Plc (acquired by Colefax Corporation in January 2012), Cookson Group Plc, Fenner Plc, Filtrona Plc, Halma Plc, Hamworthy Plc, IMI Plc, Melrose Plc, Morgan Crucible Plc, Renishaw Plc, Rotork Plc, Senior Plc, Smiths Group Plc, Spectris Plc, Spirax-Sarco Ltd, Tomkins Plc, Weir Group.

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