| Business services, engineering, post and telecoms will be the front runners of UK recovery |
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| | Business services may be
one of the first sectors
to benefit from eventual
economic recovery,
according to
PricewaterhouseCoopers’
up-turn index. The index
charts the sectors that
will be first to benefit
from the eventual
economic recovery. It
covers 15 major UK
industry sectors and
uses 10 economic and
financial indicators,
covering historical
performance, cyclicality
and future growth
potential.
Yael Selfin, head of
macro consulting at PwC,
said: “It is still
unclear when the
recovery will begin to
take hold in the UK but
as it emerges from the
global economic downturn
there is likely to be a
readjustment of the
economic and business
landscape. Some
industries will fare | |
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| | better and recover
sooner than others and
the shape of eventual
recovery may be quite
different to the
business environment
we’ve witnessed in
recent years.”
The cyclical nature
and long-term - and
relatively strong -
growth of business
services puts it in a
strong position for
accelerated long-term
growth when UK economic
recovery begins. The
sector has the highest
price earnings ratio out
of the 15 sectors
analysed, suggesting
that investors are
relatively confident
about this industry’s
potential for a fast
recovery.
Engineering will be
the next sector to
emerge during economic
recovery, according to
the index. While the | |
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| | has been relatively
unscathed by the
economic downturn when
compared to others, and
a high value for the
upside sensitivity
indicator suggests that
these businesses could
be some of the first to
benefit in an upturn in
the UK economy.
Non-food retail,
construction, utilities
and financial services
are likely to perform
broadly in line with the
overall economy. The
relatively poor
performance of the
financial services
sector in the early
phases of recovery in
the 1990s and the
overall perception - as
captured by investors’
sentiment and the
current low price
earnings ratios - that
the sector still has a
long way to go before it
recovers from its
current woes, more than | |
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| | offset the positive
impact from its overall
positive growth over the
past 20 years.
Assessment of
recovery for the oil,
gas and mining sector is
low due to expectations
of relatively lower
prices of oil and other
commodities in the
future, which will
negatively impact the
sector’s profitability.
This is partly offset by
the sector’s relatively
high equity beta, which
captures oil, gas and
mining companies’
propensity to benefit
from the improvement in
sentiments in equity
markets.
Metal products,
textiles and food
manufacturing sectors
may be the last sectors
to emerge from the
economic downturn,
according to the index. | |
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| | automotive industry,
which produces a
substantial part of the
engineering sector’s
output, has seen a
significant decline in
revenues over the last
year, the sector is
still likely to maintain
a relatively high
proportion of its
current capacity in the
downturn which puts it
in a good position to
benefit from the
eventual recovery of
economic conditions. The
sector’s reliance on the
export market could
provide significant
strength in the medium
turn, with the weak
pound and stronger
demand overseas.
The post and telecoms
sector scored highly in
the index. The low
economic beta score
shows that this sector | |
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