Companies in Europe and US cut costs differently

LEADING US and European companies are applying the knife differently when it comes to cutting costs, a new report shows.

An Ernst & Young report to be published today shows that four out of five of the world’s leading companies are preparing to tighten their belts while 40 per cent have seen a significant deterioration in business.

Close to half the 350 companies surveyed have sold or shut parts of their business, 43 per cent are seeking short-term finance and one-fifth are seeking to renegotiate their debts.

Two-thirds of the companies have begun cutting jobs and more than half have cut spending on information technology.

“European companies are more likely than their US counterparts to look to cut costs on real estate and information technology rather than cutting direct or indirect employee costs,” Ernst & Young says.

They are also scrutinising customers and suppliers. Close to 60 per cent of European respondents said their customers’ creditworthiness had deteriorated.

More than half the companies said some key buyers were in distress, and most have noticed a delay between orders and cash collection. Protecting assets, improving performance and restructuring are key priorities.