Plimsoll: Up to 5000 Jobs Could be Cut in 2007

2006 has been a highly competitive year for the tyres, exhausts & batteries industry, although some companies have been enjoying historically high margins. But 2007 promises even tougher times, according to David Pattison, senior analyst with Plimsoll. His findings are based on Plimsoll’s Portfolio Analysis –Tyres, Exhausts & Batteries.

Looking at the tyres, exhausts & batteries market over the past 12 months, while growth was a healthy 6 per cent, well above inflation, almost a third of the 1000 companies monitored by Plimsoll saw a fall in sales. This indicates that much of the growth is being shared by a select band of firms. The effect has been that the industry has begun heading in a new direction, and the companies which have found themselves lagging behind have been slow to recognise this.

In 2007, this trend is set to continue. “I see growth slowing in the coming 12 months although still above 5 per cent, with the small group of market leaders again capturing the lion’s share and the others increasingly playing catch-up. Overall margins in 2006 were 3.2 per cent, with some companies enjoying a record 20 per cent or more. But I believe these margins will be squeezed in 2007, and at least a third of companies in the sector will lose money. In common with the OECD, I don’t see interest rates having a major impact,” commented Pattison.

This, of course, will have an effect on directors’ fees. Where these increased, it was well above the rate of inflation in 2006, averaging 9 per cent on the previous year. Things will be tighter between now and next December.

One interesting aspect of the year has been the number of newly appointed directors. In the past 18 months, 180 have taken up new posts. If they start to have an impact on company performance in 2007, competition could be even more intense.

Salaries in the industry have risen again, and the average now sits at £23380 – up 3 per cent on the previous 12 months. This has largely been productivity driven, with sales per employee increasing from £137,100 to £138,500, so it is fair to say staff have earned the extra rewards. “Sadly, however, I think 2007 will see a wave of job losses, forced by modest growth combined with rising costs and, ironically, even better productivity. I would not be surprised to see as many as 5000 jobs being cut,” predicted Pattison.