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April 8, 2009

Over 100 could go as NEC Group feels bite of recession

Earlier this week, the NEC Group announced plans to restructure its business and warned that this would lead to inevitable redundancies.

The NEC Group has a regional economic impact of £2Bn and currently supports 29,000 jobs. “It is critical that we are in a strong position to endure the current economic crisis and emerge fighting fit to deliver the groundbreaking developments planned for our venues in the longer term,” said chief executive Paul Thandi in a communiqué to staff aaround the group.

“The NEC Group is not immune from the downturn in the economy and we have seen a significant drop in revenues in some areas of our business, particularly exhibitions,” he continued. “A number of our large, trade exhibitions have reduced in size over the last few years due to long-term changes taking place in the industries that these shows serve. In the shorter term, some of our other trade and consumer exhibitions are also shrinking due to the general economic slowdown.

Lower expectations
“As a result, our revenue expectations from the exhibition business over the next few years are significantly lower. As around 60% of The NEC Group’s revenue and an even bigger slice of its profit come from the exhibition business, this has a considerable impact on the Group’s financial health.

“The short-term revenue expectations from the conference business are also lower as companies cut back on expenditure and hold fewer events and in the longer term, although business prospects look strong, the nature of servicing the needs of conference organisers is changing and our business must change to reflect this.

“This fall in activity levels in both the exhibition and conference businesses will result in a reduction in revenue we can expect from catering within these venues too.

“At the same time as we are earning less revenue, our costs as a business continue to rise every year. Our response has been to look for opportunities to create new revenue. We have also looked very carefully at our business to see where we can reduce our costs.

“We have been carrying out detailed reviews across the business. These reviews are now coming to a point at which we can communicate some proposals to our employees.”

Proposed restructuring
The proposals will include: New structures, or ways of working, for certain departments; Potential for reduced working hours during periods of lighter activity levels; and Potential outsourcing of some key services to other companies

“Some of these proposals,” warned Thandi, “are likely to result in the loss of jobs. At this stage the proposals are subject to formal collective consultation, however they are significant and the number of job losses could exceed 100.”

Thandi added that despite the poor short-term outlook for the exhibitions and conference markets, the financial prospects for the Group’s Arenas and Ticket Factory business remain strong over the foreseeable future, with healthy levels of advanced bookings and ticket sales and the opening of the LG Arena later this year.

Full details of the proposed changes to the business will be announced to employees on 16 April at the start of a 90-day consultation period.

“This is difficult and worrying news for our employees,” concluded Thandi. “However these proposals are being considered very carefully. Our overriding aim remains to support our employees through this difficult period and, ultimately, to safeguard employment as much as possible – not only those employees directly employed by us today, but also the many thousands of workers in the region who rely on our continued success as a business, now and in the future.”

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