Managers face tough decisions as market slows

Massive congestion amongst the UK’s largest label companies is putting unprecedented pressure on the managers of these companies to keep their companies in the market, says a new study by industry analysts Plimsoll Publishing.

The study found that the UK’s largest 90 companies now control 98 percent of the market, an increase from 94 percent two years ago. As a result, these major companies are fighting each other in a battle for market share, which the analysts believe is having an impact on their financial performance.

Of the 90 label companies surveyed:
• 41 of the companies are showing no sales increases at all
• 43 are selling less than they were two years ago
• 59 companies have failed to increase sales at the same rate as their investment
• 38 companies increased their debts simply to hold their place in the market

David Pattison, senior analyst with Plimsoll, commented: ‘The recent slow down in the UK economy will only accelerate a long standing problem in the market. Following the last few years which have been largely profitable, business leaders have been keen to invest heavily, and in turn have borrowed heavily. Yet due to the turbulent economic climate of 2008 they are seeing very little by way of return. This ambitious investment strategy has left some companies in severe financial danger, and as a result 27 companies have been awarded a danger rating in this study as result of their failing business strategy.

‘The consequences are serious; these companies need to have serious rethink when it comes to their business models. It’s likely that jobs will be lost and key projects could be cancelled in an attempt to control the spending- but for some companies it could well be a case of too little, too late.

‘It’s likely that the management at some of these companies could be changed to accelerate the cutback process, as it’s a lot easier for new managers to come in with a clear remit and instigate these tough decisions. The other obvious option is that some of these businesses will be sold off.’

Supporting the opinion for a sell off, the full 245-page analysis suggests that the value of these 90 companies has fallen by around 40 percent in the last 12 months. Plimsoll’s report identifies the companies who are prime potential acquisition targets.