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India, China a threat to UK biz

Some of UK's biggest businesses will not survive beyond 2011 because the global centre of wealth creation is shifting towards India and China.

india Updated: Feb 03, 2006 14:26 IST

Some of Britain's biggest businesses will not survive beyond 2011 because the global centre of gravity where wealth is created is shifting towards India and China, according to an industry survey.

The major reason for the pessimistic forecast for British businesses, according to the survey by consultants Ernst & Young, is that they are growing too slowly and are ignoring the forces of globalisation.

A total of 50 non-executive directors of FTSE (London Stock Exchange) 250 firms believe that some of the businesses they work for are top-heavy, introspective and averse to risks because of pressure to focus on short-term shareholder returns.

They predict that a number of their companies will go bust, be acquired, move out of Europe or be taken private by 2011 because they are failing to react to the opportunities and threats arising from the rapid growth of the economies of China, India and Russia.

Some British companies are expanding abroad in search of opportunities for growth in the fast-growing markets of the east as the mature markets of Western Europe slow.

The Ernst & Young non-executive director survey shows that there is recognition at the top level of Britain's corporate scene that some are not acting quickly enough and will suffer as a consequence.

Speaking about globalisation, one director who took part in the survey said: "Without doubt we are sleepwalking into something that could be a very, very big problem, not only for our own companies, but also for UK plc."

Another told the surveyors: "In five years the centre of gravity where wealth is created will be shifting towards China, India and Russia. My board has its head in the sand on this subject."

The 50 directors identified areas that would have the biggest impact on their businesses in five years.

The survey concluded: "Companies who are not aggressively addressing growth and globalisation today will not be around to have a chair in five years. The comments in this area were particularly negative about British companies competing actively and successfully on the global stage.

"Many companies may face a reality that growth may only be achievable by shifting out of the high-cost European market or going private."

Douglas Nisbet, managing partner at Ernst & Young Scotland, told the media: "Some companies have their heads in the sands (about expanding abroad)
because they get scared. The further you get from your home base, the risk profile goes up."