Plimsoll's recent analysis of the UK forklift industry found 2008 has been a year of struggle and loss.

The analysis reports companies are faced with a stark choice: hold on to sales at reduced margins, or opt to reduce in size and scale.

Of the 487 firms analysed, 143 are losing money. David Pattison, senior analyst of Plimsoll, says this is a direct consequence of rising costs and price reductions, set against a slowing market.

Pattison says there is a concern over the number of forklift firms using an overdraft as a permanent means of finance. "This is a dangerous position for any company to find itself in. The banks are taking a critical look at all unsecured finance and are reassessing their exposure to small businesses," he says. "This could leave these firms in a position where their overdraft would need paying back on demand. Many of these firms simply cannot afford to do this."

The Plimsoll analysis found at least 118 companies identified in the analysis are running a dangerously high chance of failure, unless their problems are addressed.

On a positive note, the report did highlight 72 companies that improved performance throughout 2008. These companies reported a return to profit after having previously reported losses, a result of tighter cost control and a reduction in overheads.

For the rest of 2008, the analysis predicts increased acquisition activity, driven by two objectives - classic distress sales where sound businesses will be bought at bargain prices and larger players in the market using the opportunity to snap up smaller players in the market who add value to their core business.