Metal products, financial services and hotels and restaurants identified as most vulnerable to the downturn in new PwC index

Published at 10:22 AM on 01 March 2009

Metal products, financial services and hotels and restaurants identified as most vulnerable to the downturn in new PwC Index

A new UK industry ranking by PricewaterhouseCoopers shows that the metal products sector (covering the manufacture of metals such as steel and aluminium) is the sector most likely to suffer in the recession, with the financial services and hotels and restaurants sectors not far behind. The pharmaceuticals, food retailing and utilities sectors are ranked as the least vulnerable.

The PricewaterhouseCoopers Sector Vulnerability Index (last produced in 2001 but now expanded and updated for the latest available data in 2009), looks at 15 major UK industry sectors and how they are affected by ten key economic and financial factors reflecting current financial strength, historical cyclicality and future growth potential (see notes below for details).

The high vulnerability of the metals products sector reflects the fact that metals are commodity products operating in highly competitive world markets with relatively low returns on capital. With demand for these products hit badly by the global recession, the sector looks particularly vulnerable to the downturn.

The high vulnerability of the UK financial services sector reflects its role at the epicentre of the current global crisis, in particular the current high leverage and low profitability of the banking sector, which will take some years to turn around.

John Hawksworth, head of macroeconomics, PricewaterhouseCoopers LLP, said:

“While no part of UK industry is likely to escape the downturn entirely unscathed, we can make some distinctions between sector prospects.

“Our research shows that the most vulnerable sectors are those that are highly cyclical without enjoying the buffer of strong financial positions. But there is a positive message for those in industries including pharmaceuticals, food retailing and utilities. They appear to be the least exposed, although there is no room for complacency and they will not be immune to the effects of the recession.

“There is always an opportunity, however, for individual companies within vulnerable sectors to outperform and improve their market positions. Recessions tend to be Darwinian processes, in which the strongest and fittest companies survive and indeed prosper, while weaker players fall by the wayside. The current downturn is unlikely to be an exception to this rule.”

Key findings from the research include:

· The hotel and restaurant sector is comparatively exposed to deteriorating conditions in the credit markets and the economy, given that it is relatively highly geared and, as discretionary spending, tends to be very sensitive to the economic cycle.

· Engineering is also one of the more vulnerable sectors, although higher profitability makes it somewhat less exposed than the metal products sector.

· The construction industry has above average vulnerability overall, although perhaps ranks less highly than might be expected, in part because the sector was more highly geared in the past. While some parts of the sector (e.g. housebuilding) are clearly highly exposed to the downturn, other parts (e.g. civil engineering companies working on large public sector projects) are less exposed. The construction sector is also, on average, less highly geared than it was in the early 1990s recession.

· Relatively low in the index and less vulnerable to the downturn is the chemicals sector, which in the UK is dominated by pharmaceuticals companies. The latter are insulated from the economic turbulence as the pharmaceuticals industry can rely on a steady flow of orders from the NHS to help support it.

· People still need to eat in recessions, so food retailers are predictably ranked as less vulnerable than more cyclical non-food retailers. Utility companies are ranked as the least vulnerable sector due to relatively steady revenue streams despite comparatively high levels of gearing.

Kevin Ellis, partner and advisory business leader, PricewaterhouseCoopers LLP, said:

“Experience shows that history is not destiny. There are always opportunities in a downturn to improve market share. This is an environment where cash is king and companies who manage their cash most effectively will survive and thrive – for example securing money from overseas investors, exploring opportunities for joint ventures and protecting against risks from supply chain weaknesses and economic crime, which history has shown increases in tough economic times.”

For more information contact:

John Hawksworth
Head of Macroeconomics, PricewaterhouseCoopers LLP 
Tel:020 7213 1650 

Stephanie. Howel
BRS PR Senior Manager, PricewaterhouseCoopers LLP 
Tel:020 7213 2421 
Mobile:07734 456 098


About PwC

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details. © 2016 PwC. All rights reserved

« PwC recognised as leading Professional Services brand in 2009 Superbrand ranking | Homepage | Companies fail to heed warning signs that could avoid administration, finds latest PwC poll »

  • Contact us
  • +44 (0) 20 7213 1768

Specific and out of hours contacts