Boy, is it grim out there

The worst is not,
So long as we can say, ‘This is the worst’.

Anyone working in heavyside manufacturing must feel that that the light at the end of the tunnel is, in fact, that of a train and it’s is getting ever closer.

Castle Cement, Hanson, Feb, Ibstock, Weinerberger, Wavin, Celcon…There are employee consultations regarding redundancies all over the place and these are just the ones I know about.

These proposed redundancies (although I don’t think there’s very much doubt about the outcome of the consultations) are a direct result of the collapse of the housing market. The headlines I was writing six weeks ago regarding the huge scale redundancies at the major housebuilders were just the beginning.

Brick factories are set up to make bricks. If no-one wants to use those bricks, never mind buy them, there’s no point in keeping that factory running. One brick manufacturer yesterday told me that no amount of discounting would help: “we can’t even give them away. No-one wants our bricks and we have nowhere to store those we do make. Our only option is to close or mothball plant.”

What’s also quite worrying is that there is a whole layer of management in companies throughout the supply chain for whom this is the first real recession. I started work during the boom of the late 1980s so I remember what happened. Lots of people don’t and they have no idea how to handle this.

Having said that, the main difference between the two slumps is one of speed. In the early 1990s we could see a gradual slowdown. Harsh decisions still had to be made, but at least companies had time to plan them, they could see the way the market was going. This time, it’s like a switch was flicked and boom – or rather, bust – and the market stopped. It didn’t even grind to a halt. It just halted.

We have had 16 years of boom. And after boom comes bust. It has done so ever since the Stock Exchange was set up 300 years ago, and it will continue to be thus. But the bad times don’t last forever. That’s the whole point of a boom-bust economy, which is what we have, despite former Chancellors telling us they wanted to eliminate the boom-bust cycle. This situation will get better. Fact. But no-one knows when or how much better and that’s what is so scary.

So companies in the meantime have to do what they can to survive as viable businesses. If that means cutting the workforce in half then that’s what they have to do. In some instances, I think they are getting all the bad news out of the way in one financial year: you can usually ride out one set of bad results, but two on the trot is a different matter. But there’s a fine line drawn between maintaining a viable business now and ensuring that the company has the wherewithal to make the most of the recovery when it comes. More companies are lost during periods of recovery than going into recession.

When the industry emerges from this it will be a very different industry and a lot of hugely talented, experienced people will have disappeared from it. Let’s hope we can cope with that happening, as well as what’s going on now.