Research editorial: The industrial marathon is underway


​By Ludovic Subran, Group Chief Economist


Londoners will forever remember the summer of 2012 for two reasons. Firstly, it was in the City of London that Mario Draghi, the President of the European Central Bank (ECB) chose to issue a stern message to the Euro’s detractors: “The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough” he announced. We can therefore expect a particularly eventful return from the holidays, marked by a new series of political and monetary measures aimed at relieving the financial pressures which Greece, Spain and Italy have been under for more than a year now (and indirectly the rest of Europe due to the ricochet effect).




Meanwhile, on the other side of the Thames, it will be the 30th modern Olympic Games which people will remember. For a few weeks at least, these Olympics (the third to be held in London) will banish the particularly downbeat economic mood which currently exists in the United Kingdom. Amidst the feats and achievements of more than 10,000 athletes who are gathered here for the occasion, international political tensions will temporarily subside as people cheer on their country’s


In our industry news, we have focused on the effects which particularly difficult budgetary adjustments are having on industry dynamics. Has austerity become a sector-specific problem? Cost-driven management has become increasingly prevalent in themain business sectors in Europe.On the other side of the Atlantic, the process of reindustrialisation is underway but the property market and the possibility of a brutal end to key tax incentives are all causes for concern.


Finally, in the emerging economies, a slowdown in global trade is forcing these countries to focus on domestic demand and on the much-needed structuring of their industries. The continued lacklustre progress with achieving worldwide recovery is proving sorely trying for a number of sectors. Their resistance and endurance are being tested to the full, sometimes with painful consequences.


So who are the winners in this industrial marathon? The gold medal is shared, with a tie between the chemicals/pharmaceuticals sector and the food industry,which are still being spurred on by diversified demand. The silver medal goes to the equipment manufacturers (particularly in the automotive sector) and to the IT and electronics industry in the wider sense which continue to stand up well though with some difficulties. Finally, the bronze medal goes to the construction and air transport sectors. The first is exhausted due to a lack of growth drivers or public intervention while the second suffers from a lowlevel of profitability due to stiff competition and reduced margins.


Extract from Euler Hermes Global Sector Outlook - August 2012.


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