Coatings World - February 2009

International Coatings Scene

EUROPE

BY SEAN MILMO

EUROPEAN CORRESPONDENT

MILMOCW@RODPUB.COM

SMEs are fighting to hold on

The recession is beginning to cause big difficulties for the multinational European coatings businesses and their suppliers. But the ones who are being hit the hardest by the economic downturn in Europe are the small- and medium-sized players (SMEs).

Small- to

They are struggling with a lack of access to finance because of the credit crunch,

medium-sized
declining demand and even shortages in
paint companies
supplies of raw materials because of tempo-
rary plant closures and cut backs by chemi-
face the
cal companies. The difficulties facing small
toughest
coatings producers in Europe is leading to
bankruptcies or to owners selling up their
challenges in
businesses.

SMEs, of which there are an estimated

the current

1,000 in Europe with an equal number of

recession.
small decorating businesses making their
own paints, are particularly vulnerable to the
slowdown in European economies, the effects
of which are impacting a wide range of cus-
tomer sectors for small coatings producers.

The European Commission, the European Union’s (EU) executive, has reported that economic confidence across a broad section of European industrial and other sectors has plunged to its lowest level since it first began monitoring economic sentiment in the region in 1985.

After gross domestic product in the EU’s 27 member states began to decline in the second half of last year, the Commission is forecasting that GDP in the EU will decrease by 1.8% in 2009 before slowly recovering next year.

The government in Germany, Europe’s largest economy, is predicting that its GDP will go down by 2.25% next year. Among the other leading economies of the EU, the UK’s GDP is expected to record the steepest drop of 2.8% this year, according to the European Commission.

Shrinking demand in both construction and automobiles are having a damaging effect on both the businesses of large and small coatings companies.

In the automobile sector new passenger car registrations in Europe dropped by seven percent in 2008 to their lowest level for 15 years. In December registrations dived by 18% compared with a year ago.

As a result automobile companies have been temporarily shutting down plants across Europe. Honda of Japan has closed a plant in the UK until June.

House sales have plummeted, particularly in countries like the UK, Spain and Ireland, which in recent years have enjoyed a construction boom. The latest construction figures in the UK show that in November orders were at that their lowest level for 25 years.

After reducing production in many of its chemical plants in Europe and elsewhere late last year, BASF announced in January that it would be introducing short-time working for approximately 1,500 employees at its main coatings site at Munster, Germany. The company’s two main outlets for coatings are the automobile and construction sectors.

The plight of both sectors is also causing major problems for SMEs involved in decorative paints and industrial coatings.

“Volkswagen, Germany’s biggest automobile company, has just announced big cutbacks in production and work for employees, which is going to affect coatings SMEs throughout the automobile supply chain,” said Michael Bross, head of public relations at Verband der Deutschen Lackindustrie (VdL), the German coatings association.