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Recession poses threat to meat sector

One in seven meat companies could disappear in the face of a recession, a new study has warned.

The analysis, to be published on 1 May by analyst Plimsoll, has drawn on the very latest figures for each of the UK's Top 1000 companies in the meat market. The headline findings offer stark reading.

? Over a third of companies are already showing signs of recessionary behaviour, reporting declining sales. This is immediate evidence that the market is slowing down.

? 60 of companies have seen their margins fall. Of most concern, almost a third of these are currently running at a loss. The pressure on sales has forced an immediate squeeze on profitability. These companies are struggling against rising costs and declining sales.

? Almost a third have seen an increase in their need for short-term finance, a sign that costs are running ahead of cash flow. This is doubly dangerous at a time when banks and financiers are looking hard at their loan books, and therefore places these companies in an even more vulnerable position.

? As a result, as many as one in seven meat companies could disappear completely if this trend continues or deepens.

Explaining these results, David Pattison, senior analyst at Plimsoll, reports:

"We are reading every day how the credit market and the world of finance is being hit, but nonetheless, I was still surprised to see just how much the meat market is feeling the pressure. I hope this report is recognised as an early warning sign and managers read this and use the findings to steer a course though these tricky times."

The analysis is not entirely without some good news; there is some evidence that certain areas, particularly the small companies, with their concentration on local and domestic markets, are less exposed to the slowdown in the market.