It is increasingly clear that the eurozone crisis is starting to impact all corners of the UK's economy, if GlaxoSmithKline's (GSK) half-year results are any guide. Pharmaceuticals should be resilient, but management warned that the impact of savage austerity cuts in Europe, along with price falls in the US, will keep sales flat this year. Chief executive Andrew Witty said the ability of GSK to succeed in such an environment would depend on gaining access to growth markets.
The so-called 'white pill' markets in developed economies are under considerable pressure. The company's response is to restructure its manufacturing operations, which is forecast to generate £500m of savings by 2015 at an additional cost of £200m. That comes on top of the £2.5bn of annual savings GSK had already found over the past four years. It also places more pressure on the consumer healthcare business to make up the shortfall in pharmaceutical sales, which were down by 1 per cent to £10.5bn in the half. So far, the segment continues to grow, with revenues up by an underlying 5 per cent to £2.59bn, helped by demand for Sensodyne toothpaste.