Desperate or dynamic: hidden story behind UK job cuts

The slowdown in the UK economy could cost 1,625 jobs in the label industry, according to business analysts Plimsoll Publishing.

But it’s the story behind the headlines that will determine the survival of the companies in question. Customers, suppliers and competitors have no way of telling from a job reduction announcement whether the cuts were made in panic mode or for clearly thought out strategic reasons.

‘Obviously the reasons will make little difference to those who are losing their livelihoods,’ said David Pattison, senior analyst at Plimsoll. ‘But for customers, suppliers or competitors there is a crucial contrast between cost cutting without any obvious focus and scaling back jobs as part of an active program of management designed to steer the ship and keep the company competitive.’

Plimsoll’s latest survey suggests that of the 466 companies surveyed, up to 247 will need to reduce staff in some form or other. Driving this need are two main issues – the fact that 47 businesses in the sector are showing declining sales, and also the increase in salaries as a percentage of overall costs.

Salaries already account for 21 percent of sales. But if, as expected, wages rise next year by the projected 4 percent to an average of 26100, then 53 companies will be unsustainable businesses by this point, according to Plimsoll.

‘This analysis clearly pinpoints the companies most at risk and those which are best placed to survive this period of uncertainty,’ Pattison continued. ‘It also sets certain business decisions in context, showing why job losses may be announced, for example. As the market slows towards the end of 2007 and the start of 2008, companies will use the time to focus on costs. But our analysis shows that the headline-grabbing decisions are only a small part of the story, regardless of the company involved.’

Plimsoll’s report does, however, highlight some encouraging signs. Jobs are being created in the labels sector, mainly by 15 expanding companies looking to grow their workforce to cope with more business. This, says Pattison, is further evidence of where good management is creating confidence for the future.