Ernst&Young: Working capital performance down in Europe

By Rob Starr, Content Manager, Big4.com

The overall working capital performance gap between Europe and the US widened in 2011, reversing the tightening trend observed over the previous two years when Europe was closing the gap with the U.S. The US continues to exhibit much lower levels of working capital, driven primarily by strong performance in overall C2C (10% below that of Europe) and inventory (15% below that of Europe).

This according to All tied up 2012 , Ernst & Young’s latest Annual Working Capital Management Survey.

While the total reduction in C2C achieved since 2002 is now 16% for both the U.S. and Europe combined, the rate of working capital improvement has been decelerating across geographies. In the past three years, C2C performance has stagnated in both regions, while average annual gains were approaching 3% in the previous six years.

The Ernst & Young All tied up-working capital management report, contains the findings of a review of the working capital performance of the largest 2,000 companies (by sales) headquartered in the US and Europe. The analysis draws on companies’ latest fiscal 2011 reports. Performance comparisons have been made with 2010 and with the previous nine years. The review on which the report is based is segmented by region, country, industry and company

In contrast to the previous two years, the gap in working capital performance between cyclical industries – such as automotive supply, chemicals, diversified industrials, semiconductors and steel – and noncyclical industries – such as food producers, food and general retailers and pharmaceuticals – narrowed in 2011 as cyclical industries returned to a more normal growth path on the heels of the global downturn in 2008.