Cautious optimism

16th of March 2011
Cautious optimism

It has been a difficult couple of years for the eurozone, due to the economic crisis. ECJ correspondent Hartley Milner looks ahead to what 2011 may hold for the eurozone – seeking opinion from business leaders inside and outside the cleaning sector. 

Surveys show business confidence in Europe is at its highest in three years, with Germany and France emerging as the region’s powerhouses by seizing export opportunities to booming economies such as India and China.

In the latest Eurochambres Economic Survey of 70,000 companies, more than half say they expect the favourable trading conditions to continue through this year and almost a third believe the trend is set for beyond 2011. This new-found optimism is linked to better forecasts for total turnover, employment and investment.

“Overall, these results are encouraging for Europe’s economic growth,” said Eurochambres president Alessandro Barberis. “Although they remain wary about the possibility of further turbulence, businesses are broadly optimistic for the year ahead.”

And in a survey of more than 600 business leaders by the European Business Awards, half forecast growth of 10 per cent or more by the end of this year. A third say their best opportunities lie in trading overseas and another 29 per cent are looking to diversify. Other findings include:

•Eight out of 10 businesses expect some growth over the next 12 months

•Three out of 10 expect growth of more than 20 per cent

•A fifth are looking to reach more markets beyond the European Community

•58 per cent are investing.

Adrian Tripp, ceo of the European Business Awards, said: “We have identified an overwhelmingly positive view about the commercial future of European businesses which counters recent popular pessimism. What we see emerging is a new Europe that is stronger, more dynamic and competing on a larger scale. It’s clear that businesses with this outlook are the ones who are defining what commercial success looks like in the future.”

A star of the recovery in Europe is Siemens, which in fiscal 2010 generated the largest operating profit in its history. The German electronics giant reports that after declining in the first two quarters, new orders and revenue rebounded sharply in the second half. “We have just completed a very successful fiscal year,” said president and ceo Peter Löscher.

“We are emerging from the crisis in full swing. Our growth is gaining momentum. Our operating performance has, for the second time, broken a record. ”

A pillar of Siemens’ success is its trade with emerging countries, which now accounts for 30 per cent of its total business and is projected to grow further. While declining slightly in some markets, such as Europe, the company reports that revenue jumped by 10 per cent in the Asia-Australia region, 17 per cent in India, 12 per cent in China and 32 per cent in Brazil.

Demand from emerging markets proved just the tonic after a flat period for UK-based Diageo, the world’s biggest alcoholic drinks group. In the Asia-Pacific region, the producer of Guinness, Smirnoff and Johnnie Walker brands saw double-digit growth during its fiscal year to June 30 last year.
Chief executive Paul Walsh said: “Northern Europe again delivered good net sales growth and Diageo’s business in Russia continues to grow strongly. Overall, however, the consumer environment in Europe is slightly weaker than we experienced in the prior year.”

Cleaning sector

The majority of cleaning companies will have weathered the economic storm without too much of a battering up until now, according to the European Federation of Cleaning Industries (EFCI). “Overall, the industry did quite well during the past three years,” said director general Andreas Lill.

“One of the reasons for this is that, unlike in many other sectors, cleaning services have to be carried out on a client’s premises and are not a product that can be sent to countries which can produce them more cheaply, such as in Asia.”

Lill acknowledged that contractors may have had to work with their clients to reduce the number of cleans per week as a temporary measure during the downturn.

But there was a long-term benefit for the industry – companies seeing the wisdom of outsourcing cleaning operations to contractors instead of doing the work in-house, thus ensuring a quality service while reducing their costs. “In every crisis, there is an opportunity,” said Lill.

However, the outlook for 2011 is less certain, due to government spending cuts across the EU. “As public contracts constitute on average about 35 per cent to the total turnover of companies, this could have an impact on the cleaning sector – or even worse, if a public building is closed down, it follows that it cannot be cleaned,” said Lill.

A company that has already felt the impact of public sector cuts is Dutch facility services provider Facilicom. Staff manager Michel van der Ploeg said: “This was a big issue over here, with unions complaining about the public and private sectors making cuts without regard to the well-being of cleaning staff. We have had many of our contracts reduced due to clients cutting back on the number of cleans from daily to perhaps twice a week.”

He said the company saw its fortunes decline a little early in 2010, but pick up later. And he added: “We believe the worst of the economic troubles are over, though we expect conditions in the cleaning sector to remain tough over the next couple of years. We are now having to become even more competitive and are seeking to increase our business in areas such as healthcare facilities, domestic cleaning for older people, industrial and food production sites and other specialties.”

So any optimism needs to be tempered with caution. It is easy to forget the depth of the crisis and its legacy for the consumers and businesses in years to come, possible up to 2020 according to some pundits.

The European Commission has cautiously set its growth forecast for the region in 2011 at 1.5 per cent (0.2 per cent lower than in 2010) and at 1.8 per cent through 2012. It also set out 10 economic actions to a tight programme for governments to include in their 2012 budgets, covering three
priority areas:

•The need for rigorous fiscal consolidation for enhancing macroeconomic stability

•Labour market reforms for higher employment

•Growth enhancing measures.


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