British engineers face stiffer competition from German rivals following dramatic productivity gains that are set to continue, analysts warned last week.
Unit production costs within German engineering companies continue to fall. The industry as a whole has shed 40% of its employees since 1991, but turnover has bounced back to its 1991 level.
‘German engineering firms are much better positioned for the next cyclical downturn,’ said Barbara Haas, analyst at Salomon Smith Barney.
‘They have also realised that more marketing is required, and better services. It is not just about good engineering.’
Analysts point out that UK and US engineering companies have already been through a productivity revolution that has substantially reduced the cost base.
‘UK engineers have finished the process, but the Germans are still going through this,’ Haas said.
Outsourcing grows, page 14