Companies seen slashing capex 12pc this year, deeper than in 2009
BENGALURU, July 7: Big and mid-cap firms globally are expected to slash capital spending by an average 12per cent this year as they reel from the fallout of lockdowns and other measures imposed to rein in the coronavirus pandemic, analysts' estimates show.
The predicted cut is bigger than the 11.3per cent decline that occurred in 2009 in the wake of the global financial crisis and would be the steepest drop in the 14 years for which data compiled by Refinitiv is available.
"For many firms the near-death experience of the lockdown - where cash flows have simply dried up - will have a long-run effect on their willingness to take risks and invest," said Keith Wade, chief economist at British asset manager Schroders.
"Weaker investment will also hamper a recovery in productivity and reinforce the outcome of slower GDP growth."
Reuters calculated average spending cuts by looking at estimates compiled by Refinitiv for nearly 4,000 firms.
By sector, energy, consumer discretionary and real estate were seen taking the biggest axes to capital expenditure with cuts of 25per cent, 23per cent and 20per cent forecasted respectively.
Among major names announcing big cuts, BP Plc (BP.L), Exxon Mobil (XOM.N), General Electric (GE.N) have all said they will slash 2020 capex by at least 20per cent. By country, US companies are expected to slash capex by 22per cent, Russian firms by 19.2per cent and French firms by 13.4per cent. In Asia, South Korean companies led with an average capex drop of 16per cent predicted, followed by Japanese firms with an 11per cent slide. -Reuters