Subcontracting study: phew, everything is good!

Global Industrie unveils a study on subcontracting in Europe and France, carried out by Daniel Coué, consultant for Global Industry, just days before its opening.

Subcontracting in Europe

In 2017:

• Total turnover in the industrial subcontracting sectors in the former Europe of 15 amounted to 431.1 billion euros (an increase of 4%).
  This figure corresponds to the activities of 259,647 companies, employing 3.4 million employees directly assigned to subcontracting tasks (full-time equivalent). These numbers are up 1.17%.

• For the Europe of 28, the increase in value reached 4.34% (523.4 billion euros). And the number of employees increased by 1.69% (4.8 million employees).

In all European countries, with very few exceptions, there is a clear return to growth in 2017. This upward trend even accelerated in the second half of the year. This explains the "good numbers" recorded in most countries, especially in France. Overall, industrial subcontracting activities grew by 4% in the former Europe of 15 and by 5.93% in the 13 new members of the European Union.

Great growth, then! All the more gratifying as it contrasts sharply with the slump of recent years... Caution anyway! Because the economy of the Old Continent remains convalescent. The after-effects of the 2007-2009 crisis, however distant, are still fading. Fiscal restraint measures taken by the authorities of the various states prevent the development of a stronger recovery and a more predictable economic situation. Although these policies tend to soften somewhat, support for the economy is still very limited. On the other hand, tax pressures remain high and remain lenient or even recessive. Increases in raw materials and energy are also causing concern among industrialists. International competition is growing. And the gradual rise in euro-dollar parity is likely to weigh on the export competitiveness of European companies.

For the time being, these negative phenomena are opportunely offset by the recovery in global growth, around 3.5% (6 to 7% for industrial production)... It is essentially it that pulls economic performance upwards.

In the end, we note that European outsourcing is doing quite well... And that's what you have to remember!

Subcontracting in France

In 2017:

• Total turnover by French subcontracting companies reached 73.67 billion euros, up 4.76% compared to 2016.

• The industrial subcontracting sectors have 31,054 companies of all sizes, employing 507,224 employees (full-time equivalent). These numbers are up 1.60%.

Last year, the activities of companies with 20 or more employees increased further, confirming the recovery that began in 2015 and 2016. This increase is mainly due to a significant improvement in the international environment, which has benefited direct exports from subcontractors as well as their indirect exports, through foreign sales of contractors. Despite a slight slowdown at the end of 2016, the trend was reaffirmed in the first half of 2017. Most importantly, it has increased markedly in the last months of the year. This explains why the final results are significantly higher than our previous estimates.

Let us not call these figures "euphoric." All the more so because they are part of a very unpredictable climate in the long or medium term. But it is clear that they mark a superb embellishment after the calamities and bumps suffered in the years 2008 to 2014.

On closer inspection, we discover a highly contrasting situation between sectors. Averages don't tell the whole thing! The figures deserve to be analysed in detail. What the table displayed as picture above allows.

As can be seen, the improvement has been slower in some activities than in others. But the positive signs largely dominate. The highest scores, both in production and in turnover, are found in stamping, metal processing, forging, plastics processing and outsourcing to electronics and electrical engineering. On the other hand, sectors such as moulds, models and tools, mechanical gears and subsets, elastomer processing or textile shaping are below the general average.

Two trades - foundry and the manufacture of springs and components in wires - are still in decline in their production activities. But they too are returning to the positive in turnover.

Prices... This is the other good news of 2017!

For industrial subcontracting as a whole, market prices increased slightly. Overall, the increase was 0.94%, compared with a decrease of 0.14% in 2016. Not what, rave, of course! But still. Again, this is a long trend that is reversed.

Two main reasons for this:

• With growth, production capacity returns to more satisfactory utilization rates (84% on average) and therefore competition tends to soften.
• Increases in commodity prices, which have been re-emerging for about a year, may have been partly reflected in selling prices. Not all sectors and businesses are, from this point of view, housed in the same brand. The power relations with the contractors, the negotiating capabilities with the materials suppliers play a key role. Vast subject!

These developments are generally encouraging optimism. With the right caution! Because, if you look at them, the figures appear contrasting and confirm the randomness of the current recovery. Our industry remains tossed to the winds of the "globalized" economy and the vagaries of decision-making centers often exogenous. However, it undoubtedly benefits from real and sustained growth. And outsourcing, obviously, benefits. That's the main thing...

Find out more: www.global-industrie.com