A new report by British market analyst Plimsoll Publishing reveals tips to help UK forklift companies avoid insolvency - but only if they are prepared to make tough decisions.

Restructuring specialists believe the number of UK insolvencies will soar by 55% by the end of 2009.

David Pattison, senior business analyst at Plimsoll, says companies need to understand the extent of the problems they are facing in order to fix them. "The symptoms of a failing business are all too familiar," he says.

Companies go through a five-stage process on the slippery slope to failure - pressure to increase sales and ultimately sell at a loss, taking on extra short-term debts to finance the sales drive and then the banks suggest a switch to long-term finance. The final two stages are an increasing overdraft that erodes profits and finally nervous banks demanding immediate repayment of the uncontrolled debt.

Pattison says the critical factor in this cycle is to understand the key measures to monitor in the business to pinpoint any decline. "If companies are made aware of their problems sooner, management then has more time to put a survival plan in place and stave off the administrators."

He says companies in this situation have three options if they want to survive: "They can cut costs now but that is not easy; it means the company must accept it will be a smaller enterprise," he explains. "The objective must be to reduce the level of debt and get the business back on an even keel.

"They can sell the company, look for an investor or the third way, trade their way out. However, in the current economic climate, this trading their way is the least likely strategy," he says. "Most of these companies have fairly long-term problems, so it's clear their current business is not competitive in the market."

Pattison says out of the 483 UK forklift companies, 110 are considered in danger and at risk of failing.