40% of Australian companies set to slash jobs as crisis worsens

Around 40% of Australian companies are set to slash jobs as a reaction to the global financial crisis, a new survey has revealed.

Around 40% of Australian companies are set to slash jobs as a reaction to the global financial crisis, a new survey has revealed.

The Australian Industry Group’s special survey asked 303 companies across the manufacturing, construction and services sector to rate the impact of the crisis on their companies – and the news wasn’t good.

Just over 60% of companies said the crisis had negatively affected their business, with 55% saying they expected production to fall as a result and 53% claiming employment prospects have taken a turn for the worse.

Almost 60% said sales had fallen as a result of the crisis while a whopping 64% said new orders had been hit. Around 56% of respondents said their capital investment plans have been negatively affected by the crisis, although this has helped ease demand for credit, with 67% of firms reporting the crisis has had no impact on their ability to get loans.

The most worrying results of the survey came in the area of the planned responses to the crisis:

• 40% of firms are planning to reduce employment.
• 38% are planning to cut costs.
• 28% are planning to reduce investment.
• 25% are planning to reduce production.
• 10% are cutting back on R&D spending.
• 40% a revising their business plans.

AIG chief executive Heather Ridout says this early assessment of the impact of the crisis on the real economy shows just how widespread the fallout is.

“It is deeply worrying that so many businesses are expressing concern on so many fronts,” she says.

“The projections for new orders and investment are particularly worrying, as these are critical pointers to the impacts over the months ahead. One in four companies report a strongly negative impact on new orders and 38% report a moderately negative impact on new orders.

“Whether this downturn in new orders is sustained and flows through into major impacts on future production will depend in great part on whether or not confidence returns to the market.”

Another worrying sign is the fact that around 15% of firms have started drawing down on retained earnings to help them weather the storm, while a similar number have already tapped into an overdraft facility.

These figures show how quickly the crisis has hit the balance sheets of Australian companies and it is a big concern that companies are already being forced to eat into the reserves built up during the economic boom of the last decade.

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