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The manufacturing sector faces a long road to recovery

10 March 2009

As the recession takes a firm hold on the UK economy, research from the Institute for Turnaround (IFT) and GE Commercial Finance reveals that the manufacturing sector is among the top three sectors most likely to be hardest hit by the economic downturn.

The manufacturing sector faces a long road to recovery
The manufacturing sector faces a long road to recovery

The recent poll conducted amongst turnaround professionals, who are often parachuted into companies when they get into difficulties, indicates that 15% believe businesses in the manufacturing sector among those most likely to be the worst affected by the slowdown. This is alongside retail (25%) and construction (22%).

"As the recession grips the nation many UK businesses have seen a hefty impact on their balance sheets. While some managers may have taken steps to prepare their businesses, many could not have predicted quite how severe economic conditions would become. It is vital businesses keep a close eye on their cashflow and cut any unnecessary costs in order to pull through these adverse conditions,” commented Christine Elliott, Chief Executive of the IFT.

Overall, confidence in the UK business sector remains low, with only 10% of members believing UK firms are well equipped to deal with a downturn in the economy. Despite alarm bells sounding many months ago this is only a 6% increase on the same period last year. Regionally speaking, businesses operating in London are expected to be hardest hit, followed by the Midlands, the South East and North East.

"These are unprecedented circumstances for many UK businesses and swift action should be taken by managers who wish to protect themselves against any further losses." said 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 generating cash in order to increase their chances of surviving the economic crisis.

"Using alternative forms of finance, such as asset-based lending, could provide another solution for those businesses who have found cash flow to be a problem. Releasing cash tied up in assets such as invoices, inventory, plant and machinery can often provide businesses with the headroom they need to stay afloat, if not expand," continued Jenkins.

Also on their list of tips is to seek the advice of experienced managers and business advisors early on and to focus on costs.

"Due to the exceptional circumstances of this financial crisis, many mangers will feel in the dark as they try to navigate their business through these difficult times. However, seeking the advice or guidance of a seasoned professional or business manager can help businesses ensure they have the right structures in place so that they are best placed to deal with the economic downturn and in some cases emerge stronger,” concluded Elliott.

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