With the prospects of a significant slowdown in the UK economy, new research from the Society of Turnaround Professionals (STP) and GE Commercial Finance indicates the top three sectors most likely to be hit by a deterioration in the economy are those operating in the retail, financial and manufacturing sectors.
The recent poll* amongst turnaround professionals, who are often parachuted into companies when they get into difficulties, indicates that 9% believe that businesses operating in the manufacturing sector are amongst the least prepared for a downturn in the economy, alongside those in the retail sector (63%) and financial (13%).
"With the last major slump in the economy having been in the early 1990s, many of today's business managers and owners have not had to deal with the consequences of softening demand and limited credit availability. Being able to successfully deal with these more adverse conditions will require businesses to focus on their cashflow, costs and markets," said Christine Elliot, Chief Executive of the STP.
According to the poll of STP members, who have turned around many hundreds of companies in difficulty, only 4% believe that UK firms in general are well equipped to deal with a downturn in the economy, with over half (52%) believing that they are poorly prepared. The top three regions most likely to be hit by a deterioration in the economy are those operating in Wales, the North East and London.
"In recent years, the consumer has been a major force underpinning the strength in the UK economy. Recent interest rate hikes, increased tax burden and fuel inflation have taken their toll which, in turn, limit discretionary spending in areas," says John Jenkins CEO, GE Commercial Finance, Business Finance.
Based on their significant experience of helping companies in trouble, the turnaround professionals polled think that first and foremost businesses should focus on improving their cashflow in order to increase their prospects of weathering any storm.
"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," said Jenkins.
Also on their list of tips is to seek the advice of experienced managers and business advisors early on and to focus on winning new business from customers less likely to be hit by a slow down in domestic demand.
"Acting early before problems arise is essential. Seeking the advice or guidance of a seasoned professional or business manager can help businesses focus on ensuring that they have the right organisational, cost and financial structures to see them through more difficult periods, whilst also helping to identify new markets to boost sales," concluded Elliot.
About GE Commercial Finance
GE Commercial Finance, which offers businesses around the globe an array of financial products and services, has assets of over $234 billion and is headquartered in Norwalk, Connecticut.
General Electric (NYSE: GE) is Imagination at Work - a diversified technology, media and financial services company focused on solving some of the world's toughest problems. GE serves customer in more than 100 countries and employs more than 300,000 people worldwide. For more information, visit ge.com.
About GE Commercial Finance, Business Finance
Established for 40 years, GE Commercial Finances Business Finance unit is a leading independent structured finance provider for SMEs and provides a wide range of businesses with financing to support their day-to-day activities as well as major initiatives such as MBOs, MBIs, corporate restructures, acquisitions, plant investment and development into new markets.
Its experience, size, track record and, most importantly, independence mean Business Finance can offer innovative and flexible business finance solutions. It can create funding options based on a combination of debtors, finished stock, plant and machinery, unencumbered land and buildings, historic and projected cash flow and even the value of a brand.
About the STP
The Society of Turnaround Professionals (STP) was established in 2000. Its accredited members are proven experts at rehabilitating under-performing organizations within a very wide range of industry sectors, and many different types of ownership structures. As the professional body for turnaround practitioners, STPs remit is to ensure that the highest standards of ethics, behaviour and quality are observed and adhered to by its membership.