The electronics industry needs to focus on the principles of traditional cash management to weather the recession.

“Clearly, the credit squeeze has had a massive and sustained impact on the way manufacturers operate throughout the world. The trouble is, too many businesses in the UK are continuing to trade as normal, without changing their operations to take account of the new cash-hungry regime. We are now seeing a significant number of otherwise solid electronics companies that are weathering the current economic storm, while living on borrowed time in a financial sense."

“While many smaller, tier two suppliers might be facing problems finding cash to pay offshore suppliers up front, what’s even more alarming is the number of larger original equipment manufacturers (OEMs) that are being severely hampered by the squeeze on finances. We are now hearing of several cases of major electronics manufacturers that on the face of it, have sound businesses, but once you delve deeper in the accounts, you realise that they are built on shifting sands."

“Let’s take the example of a profitable, innovative manufacturer developing sophisticated solutions in a mature market sector such as healthcare. Growing at an impressive 30 per cent per annum in recent years, the company is making good annual profits of over £20m. All looks rosy in the garden until you learn that the business has recently been acquired with highly leveraged funding on a debt to equity ratio of 10:1. "