A report from business analysts Plimsoll suggests that 2006 has been a highly competitive year in the UK baking industry, and conditions in 2007 are set to get even tougher.
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Although some companies have been enjoying historically high margins, the Plimsoll report said no-one would describe it as a comfortable environment. While the sector has grown by a healthy 4.2%, a third of the 940 companies monitored by Plimsoll saw sales fall in 2006, indicating that much of the growth is being shared by a small group of companies.
Moreover, the report forecasts that this trend will continue in 2007. “I see growth in the coming 12 months remaining in the 3% to 5% slot, with the small group of market leaders again capturing the lion’s share and the others increasingly playing catch-up,” said Plimsoll’s senior analyst David Pattison.
Pattison also forecasts pressure on margins in the coming year. “Overall margins in 2006 were 3.0%, with some companies enjoying a record 20% or more,” he said. “But I believe these margins will be squeezed in 2007, and at least a third of companies in the sector will lose money. In common with the OECD, I don’t see interest rates having a major impact.”
However, the report, entitled Plimsoll Portfolio Analysis – Bakery, says that average salaries have increased in the UK baking sector, with the average salary now GBP19,000 (US$37,300), up 2% on the previous 12 months. “This has largely been productivity-driven, with sales per employee increasing from GBP69300 to GBP78500, so it is fair to say staff have earned the extra rewards,” Pattison said. “Sadly, however, I think 2007 will see a wave of job losses, forced by modest growth combined with rising costs and, ironically, even better productivity. I would not be surprised to see as many as 2,800 jobs being cut.”
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