Risk & Economy » Regulation » Poor working capital management costs industrial manufacturing industry €141bn

IMPROVING working capital could create a cash opportunity of up to €11.7bn (£10.6bn) for UK industrial manufacturers, compared to €34.4bn across Europe, according to new research from PwC.

Against a backdrop of global economic and headwinds, the industrial manufacturing sector grew by an average of 10.7% in 2015. However, this upsurge in revenue performance didn’t translate into much needed working capital management improvements.

PwC estimates the global cash boost that could be generated by better WCM practices to be in the region of €141bn.

Cara Haffey, PwC UK industrial manufacturing leader, said: “The UK manufacturing sector is facing a technology renaissance that has the potential to transform the look, systems and processes of organisations. But if it they are to grab this opportunity – which could result in significant productivity gains, enhance their ability to compete against rivals and potentially gain market share – they need cash… and lots of it.

The study reveals that performance trends in working capital have not only plateaued but are close to their five year peak. In particular, Europe and Americas have struggled to make any gains in their efficiency levels. The heavy electrical equipment sub sector remains the most capital intensive area, with a working capital ratio that is a third higher than any other.

Nevertheless, the report estimates that industrial manufacturers in Asia could benefit from as much as €70.3bn -predominately by improving WCM in machinery (€25bn) and industrial conglomerates (€22bn) sub sectors.

Across Europe, the figure falls to €34.4bn, with the machinery sub-sector alone capable of releasing a cash boost of over €19bn. Meanwhile firms in USA and Canada could free up to €29bn, with industrial conglomerates and machinery accounting for almost two-thirds of this potential cash reservoir.

Download our Whitepapers
Accounting Software
Finance Process
Finance Process
FD Surveys
Read more
Business Recovery

How to turn a cash crisis around in five days

By Shereen Ali | Deputy Editor
Company News
Corporate Finance

REL Working Capital Survey 2016

By Financial Director | Reporters
Corporate Finance
Corporate Finance