Is your glass half full or half empty? Either way, you’ll find comfort in the economic data that’s landed over the past week. You’ll also find a ranking of risks to which you need to be alive.
This week’s CBI industrial trends survey didn’t paint a gloriously optimistic picture. Manufacturing growth accelerated at its strongest pace in a year, yet investment intentions deteriorated significantly in the three months to July. With investment plans in buildings scaled back significantly – down 14% no less – real estate provided a break on the headline figures.
Days earlier the Office for National Statistics’ first ever monthly GDP release had landed. With a modest headline rise in May, this time a 2.9% increase in output growth in construction provided a boost. (Hold on, glass-half-fullers, on a quarter-on-quarter basis, which smooths out monthly volatility, output fell for the seventh consecutive month, the longest negative streak since 2012.)
What to do? Concentrate on growth and opportunity, for sure, but stay focused on risk too.
Three corporate announcements this week – from Channel 4, Hammerson and Cushman & Wakefield – highlight why.
Channel 4’s connectivity issues
Channel 4 announced the six cities it will negotiate with over the future location of its HQ and two creative hubs.
Liverpool didn’t make the cut. “One of Channel 4’s reasons for not choosing Liverpool was due to connectivity issues, which is a welcome confirmation, from a London-based organisation, of the damage a sustained lack of investment in the region’s infrastructure has done,” said mayor Joe Anderson. The risk of poor transport connections is that businesses don’t invest in a city. That’s demonstrably true in this case. Taking that argument to government must be the next priority.
Hammerson outlines the risks
In announcing a new strategy, Hammerson also outlined the risks facing its sector: “The financial strength of retailers and other tenants in the UK has worsened with an increased number of administrations or CVAs. Consumer confidence has also remained subdued with poor retail sales metrics.”
That’s why it’s focusing on flagship retail destinations and premium outlets and exiting retail parks, as well as shrinking department store space by a quarter and high street fashion by a fifth. Some saw it as too little, too late: we’ll see whether its strategic shift is enough to mitigate the risks.
Cushman’s IPO plans
Meanwhile,this week Cushman & Wakefield firmed up plans to raise $810m (£617.5m) from a US listing.
Its prospectus outlines a comprehensive set of risks to the business. They run from the macro (“disruptions in general economic, social and business conditions”, currency fluctuations and “adverse developments in the credit markets”) to the micro (“the inability of our acquisitions to perform as expected and the unavailability of similar future opportunities” and “the substantial amount of our indebtedness”).
They also cover talent and intangibles – “perceptions of our brand and reputation in the marketplace”.
But perhaps most revealing is the stark risk to the very foundations of the agency business: “Disruptive innovation by existing or new competitors could alter the competitive landscape in the future. There is no assurance that we will be able to compete effectively, to maintain current fee levels or margins, or maintain or increase our market share.”
It’s not just Cushman – nor firms of Cushman’s size – that should be asking themselves how they intend to manage obsolescence, the biggest risk of all.
