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.
Business whose operations span a number of sectors and a broad variety of projects put immense demands on FDs and their supporting finance teams
For any CFO of a PE-backed business the prospect of entering a dual track sales process can be daunting
Construction companies waiting two weeks longer than last year to get paid
Companies across the world have the opportunity to release €1.1trn in cash from one of the cheapest sources available, working capital