This page contains a Flash digital edition of a book.
The Analysis News & Opinions


Thoughts on the Jaguar LandRover announcement

Last month, Jaguar LandRover announced 5,000 job losses. China is the company's biggest and most profitable export market. However, cautious Chinese consumers have been holding back due to global trade tensions. Also, the normally cordial relationship between Jaguar LandRover and its Chinese sales network has been strained as dealers want better terms and promotional incentives. A war of words relating to Brexit and the

perceived UK government’s message about owning a new diesel car, and how this may impact the environment, and the tax added and value deprecation, have all led to a rapid downturn in diesel car sales, which are predominantly the engines used at Jaguar LandRover. This is a great shame when considering the new generation diesels produced by the firmare ultra low emission. It is evident the company are making big

financial investments; they have appointed Boston Consulting Group to put together the turnaround plan; and technology upgrades to meet low-carbon commitments. In addition, the company has said there would be an electric option for each of its models post 2020. Also, the company has revealed they will

transfer all production of its Land Rover Discovery model from the West Midlands to a plant in Slovakia by the end of this year and, perhaps, more production there in the short term, whilst they develop EV production lines in the Midlands. So perhaps a significant question is:

are they moving quickly enough for their traditional market? It appears evident the company has been slow in getting into hybrids and now they have to speed up in getting fully into electric vehicles, especially if they want a piece of the EV market and not be so over reliant on one market.

Dr Jonathan Owens Lecturer in operations management, the University of Salford Business School

One in 10 could be a ‘zombie business’

Over one in 10 (11%) UK companies is just paying the interest on its debts, rather than repaying the debt itself, according to new research. Analysts consider that only being able to

pay the interest, not the original debt itself, is one potential sign of a so-called ‘zombie business’ – a company which is only surviving thanks to low interest rates but which otherwise might not be viable. R3’s research also found that other signs

of acute business struggles are relatively widespread. One in six (16%) businesses are having to negotiate payment terms with creditors; one in 10 (12%) are struggling to pay their debts when they fall due; and 8% would be unable to repay their debts if interest rates were to increase by a small amount. Stuart Frith, president of R3, said:

“Tougher trading conditions and much uncertainty over the future of the economy have contributed to a significant chunk of UK businesses finding themselves stuck in ‘zombie business’ mode. “These businesses are capable of ticking

along, but growth and increased productivity improvements are out of their reach for the time being. On the one hand, this means thousands of businesses are stuck in a position where they will struggle to deal with external shocks. This presents a problem if they all were to become insolvent at the same time. On the other hand, you have a significant proportion of businesses which are tying up investment and staff which could be used by more productive companies elsewhere in the economy.” He added: “Our members have reported

that economic uncertainty is contributing to firms treading water, with some building up stock to safeguard against future risks – such as the UK leaving the EU without a deal next March. Investing in the stockpile puts pressure on cashflow and investment in other areas, while large stockpiles will take time to turn back into cash and are at risk of obsolescence. Rising interest rates will have also contributed to businesses stumbling into ‘zombie business’ status.

6 “The future for these ‘zombie businesses’

is mixed. Some might eventually be able to restructure or find new investment, and grow. Others will run out of road and become insolvent. While this would mean capital could be ‘recycled’, it may also be a bit of an economic shock in itself.” R3 also tracks more general signs of

business distress, and has detected an increase in these signs from early in 2018. Three-fifths (60%) of businesses (up from 57% in April 2018) reported that they have recently experienced at least one of the following: being owed payment on invoices that are over 30 days past due (20%), a reduction in sales volumes (16%), decreased profits (16%), regularly using the maximum overdraft facility (13%), or having had to make redundancies (12%). Conversely, signs of growth have dipped

over the same period. Two-thirds (67%) of businesses (down from 69% in April 2018) said they had seen at least one of the following signs of growth: an increase in sales volumes (25%), investing in new equipment (22%), increased profits (21%), market share has recently grown (17%), or the business is expanding, either geographically, increasing staff numbers, or new areas of business (17%). Mr Frith concluded: “It is worrying that

business distress signs are ticking up, while growth signs are trending downwards. With uncertainty coming at them from several vectors, businesses need to stay on their toes and ensure they are in shape to meet the future demands of the market, and customers’ ever-higher expectations.”

February 2019

Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52