UK businesses are not prepared enough for a slowdown in the economy, a new report has found.
The survey, by the Society of Turnaround Professionals (STP) and GE Commercial Finance, has indicated that the management of many businesses may not be ready to deal with the consequences of a recession.
The report found that just 4% of turnaround professionals who help failing companies, believe businesses in the UK are well equipped for a deterioration in the economy, with over half saying they are ‘poorly’ prepared.
Respondents said the three sectors most likely to be badly affected by a downturn are the retail, leisure and hotel, and manufacturing industries.
The STP said with the last major slump in the economy having been in the 90s, a large proportion of today’s managers have not had to deal with the consequences of a slowdown.
It warned businesses that to increase their prospects of surviving a slump, the focus should be on improving their cashflow and winning new business from customers less likely to be hit by recession.
John Jenkins, the chief executive of the business finance division of GE Commercial Finance, said recent interest rate hikes, increased tax burden and fuel inflation had been taking their toll on consumers’ spending power.
“Many profitable firms can quickly end up in difficulty if they have not focused on generating cash quickly.
“Using alternative forms of finance, such as asset-based lending, could play a significant role in helping some firms release cash tied up in assets such as invoices, inventory, plant and machinery,” he added.
Christine Elliot, the STP’s chief executive, advised businesses to act before problems got out of hand.
“Seeking the advice or guidance of a seasoned professional can help businesses focus on ensuring they have the right organisational, cost and financial structures to see them through more difficult periods, while helping to identify new markets to boost sales,” she said.
© Crimson Business Ltd. 2008
