Slump brings opportunities, but threats are still there

Aug 12 2009 by Peter McCusker, The Journal

OVER half of North East companies are looking to take advantage of opportunities created by the economic downturn by making an acquisition or establishing a joint venture with former competitors.

According to the latest survey into the owner-managed business sector by national accountancy firm Baker Tilly, 15% of local firms claim to be planning to expand overseas within the next three years, while 23% say they expect to increase their level of debt.

However 53% of North East companies are predicting further redundancies, 45% say they expect a further drop in sales in the coming year and only 18% anticipate an increase in operating profits.

Nationally the survey shows that larger businesses are more optimistic about the next 12 months:

:: 46% of businesses with a turnover of £50m or more expect an increase in sales;

:: 23% of the smallest firms (turnover under £10m) expect an increase in sales;

:: The mid-tier respondents, those turning over £21m to £30m, are the most pessimistic with over half expecting their sales to fall.

Angela Toner, corporate finance partner at Baker Tilly in Newcastle, said: “Large firms are often better capitalised and in a stronger position to cope with a slowdown.

“However, on the flipside, smaller firms can be more nimble and quicker at adapting to changing economic conditions. It is those in the middle that need to consider where they can tighten up and improve efficiency for their ongoing success.

“Funding flexibility in these situations is important. While obtaining finance is clearly difficult there is funding available provided you understand where to look.

“Between the various government initiatives, the slowly healing banks, and the mountain of private equity funding sitting on the sidelines, money can be found.”