by Edward Ainsworth
14. July 2010 22:28
I highlighted economic fundamentals as one of the key influencers in procurement at the moment. For UK based companies the current enviroment is showing two clear trends:
· The recovery is distantly mixed. Unemployment is down, but mainly due to part time work. Growth remains uncertain. Public spending cuts will make a big difference to particular sectors including construction, IT and business services. Overall, this is resulting in many supply markets remaining soft, and suppliers keen to do competitive long term deals. We are finding in our work and also in the data that now is a very good time to put in place longer term creative deals with suppliers.
· The pound is strengthening in particular against the dollar and euro. Economic news, the potential for interest rate rises due to high inflation is at 3.2% (down from 3.4%), and the governments debt reduction approach are all contributing to the pound being at its highest level since November 2008. Inflation I expect that there will be more fluctuations in the level of stering that need to be factored into any long term supply agreement. However now is a very good time to consider creative European or American options. (See chart below of £ vs Euro).
Both of these trends are creating opportunities for companies to deliver additional in year benefits, and requiring companies to work hard to prevent inflationary increases.
