Future outlook
Market trends since the July trading update continue to support the Group’s view that in the short term market conditions will remain challenging driven by tight credit conditions, high levels of foreclosures and rising unemployment rates. New residential markets are expected to show continuing signs of stabilisation, RMI markets will continue to decline albeit at a slower rate and Commercial and Industrial markets are expected to decline at a faster rate. Each segment is likely to recover at different rates dependent on local economic and credit conditions.
Overall, we remain cautious as to the outlook in 2009/10, although profit trends in the second half are expected to improve, driven by cost reduction actions already taken in 2008/9 which is expected to result in incremental benefit in 2009/10 of £233 million. During 2009/10 actions to lower the cost base will be taken according to anticipated local market conditions, to ensure operational leverage is maximised as markets recover. At the same time, the Group will continue to evaluate where to prioritise future investment, in order to develop its leading businesses which are characterised by leading competitive positions and strong customer franchises.