Analysts: UK Tyre Industry Will be Fragmented in 2011

New research by analysts at Plimsoll suggests the UK tyre market is polarised between “those getting it right and those struggling to recover.” David Pattison, senior analyst and author of the 2011 Plimsoll Analysis explained: “Now that the storm is lifting we have been able to assess the damage left behind. 38 companies are in parlous state and starting the New Year clinging on for dear life. We have rated them as Danger accordingly. Falling demand was the final nail in the coffin for many. The mistake they made though was to not make those painful cuts early enough to protect their business”.

So what do these contrasting fortunes mean for the UK tyre industry? Firstly getting back to growth will be paramount. According to Plimsoll, companies need to look to beat the current average profit margin of 2 per cent if they are to cover costs and invest in other growth areas. Currently a group of 31 companies are said to be leading the way with growth of over 10 per cent.

Meanwhile the 38 companies Plimsoll rated as ‘danger’ are described as “simply not competitive in the current economic environment” with Pattison adding: “Even their attractiveness as an acquisition is diminishing as new growth areas look more exciting. Watch out for a wave of corporate failures among these companies in 2011.”

 Finally mergers and acquisitions are predicted to continue but the profile of companies involved is expected to shift: “There will still be distress sales this year as companies buy struggling competitors on the cheap. However, there will be a return of more strategic acquisitions as larger companies look to buy into growth areas in the market. The new Plimsoll Analysis has named 13 distressed companies that could be bought for a discount and a further 6 fast growing companies that are sure to attract the attention of the larger players in 2011.”

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