| 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
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. | |
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| | 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 offset the positive | |
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| | 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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| | While the 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 has been | |
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