Concerns about the UK economy don’t scare Gerry Pack, the chairman of UK travel and leisure specialist Holiday Extras. He founded the company back in 1983 and has seen it all before.

‘I know you can’t look back and say that the same things are going to happen again, but I have been through a couple of recessions now and each time we have come out stronger because people still tend to go on holiday. They might be going to Spain instead of Florida, but they still go.’

That’s not to say he’s blasé about what’s happening, especially since the business acquired a major competitor, the airport car park specialist BCP, in October 2007.

It’s pushed Holiday Extras’ turnover from £130 million up to around £200 million an staff numbers are 700, up from 500.

‘Our financial year kicked off at the start of April, and certainly the month of April was poor compared to the previous year,’ he says. ‘Both our hotel and our car parking booking services came under pressure.’

May and June have been better, says Pack. But if he’s learnt anything from previous downturns, it’s that ‘you have to work harder at getting business to increase your share of the marketplace. That’s the only option you’ve got, and if you’re a big player you have to come up with some innovation and stay ahead of the game.’

The effect of inflation

With fuel and food costs rising, inflation has hit 3.3 per cent. The Chartered Institute for Purchasing and Supply’s index of service sector activity showed a fall from 50.4 to 49.8 in April, the first decline since March 2003. In addition to this, high street activity dropped for a second consecutive month in May, according to the Confederation of British Industry, as retailers put prices up at the fastest rate since 1992.

The Organisation for Economic Co-operation and Development predicts the consumer price inflation index will rise to above 3.5 per cent later this year, although it expects this to fall back to the Bank of England’s comfort zone of less than three per cent during 2009. Times are unquestionably harder, but as Holiday Extras shows, it’s possible to turn things to your advantage. Resilience can spring from a variety of sources, including a presence in non-cyclical sectors, high levels of forward visibility from long-term order books, exposure to regulated sectors or the sheer diversity of a business.

Elizabeth Gooch, chief executive of operations management solutions specialist EG Solutions, is pleased about client wins this year and upbeat about prospects.

‘The market is not too dissimilar to what happened between 2001 and 2004. In that period, it was the life and pensions businesses that were hit hardest and the mortgage lenders were fine.’

Money matters

That’s all changed with the global banking crisis. ‘In recent years, the mortgage lenders weren’t overly interested in cost savings, which struck me as perverse. Now a number of them have come back to us and said that they do need to look at reducing costs.’

Ben Goss, CEO of Distribution Technology, which supplies software to financial institutions, has seen the company’s turnover hit £6.5 million. He says: ‘Sales have been growing – touch wood – quarter on quarter in the past two years. The credit crunch started last September and in the past three quarters we have seen nothing but accelerated interest and growth in the business.’

Like Gooch, he attributes this to a tightening up in the approach to both operational efficiency and risk management by the financial institutions. ‘The demand for advice on remortgaging has quadrupled in the past six months, and everyone is thinking hard about mortgages, as there is a decreased supply. The actual demand for mortgage advice has gone up, not down.’

Goss is keen to point out that he doesn’t welcome the downturn, as ‘it’s clearly a very volatile time in the stockmarket’. Nevertheless, the only change in Distribution Technology’s strategy is that the company is expanding more rapidly than was forecast at the beginning of the financial year. ‘We’re adding more sales people and are developing new products,’ he says.

The importance of a diverse client base

Neil Stothard, managing director of specialist rental business Vp, argues that the company is well positioned to cater to the ups and downs of the economy. It operates in markets that range from construction and civil engineering (where regulatory drivers in water represent a huge investment plus) to rail, where work rumbles on in fair weather or foul, and the buoyant oil and gas sector. ‘We offer exposure to regulated, non-GDP-driven markets that are not affected by the credit crunch, as well as GDP-driven markets,’ assures Stothard.

Similarly diverse is Driver Group, a provider of commercial and dispute resolution services to the construction industry. Thriving in the UK, particularly in London and the South East, where activity is forecast to remain strong in the run-up to the Olympics, Driver also offers exposure to construction markets in the Middle East. While the business isn’t immune from a downturn, its services – including claims preparation, negotiation and settlement as well as commercial management of construction projects and risk analysis – should remain in demand even if belts tighten.

Crucially, Driver boasts a spread of clients – no one accounts for more than ten to 12 per cent – across different construction sub-sectors, and some 80 per cent of its work is repeat business with large contractors.

RWS Holdings has carved out a niche for itself in the growing, yet highly defensive, patent translations market. Steered by executive chairman Andrew Brode, the highly cash-generative company provides intellectual property support services and high-level technical, legal and financial translation services. Its core business translates more than 50,000 patents and IP-related documents every year, while serving a wide range of blue-chip clients from across Europe, North America and Japan.

Hungry for acquisitions, RWS, which boasts formidable firepower in its £17 million of net cash, should continue to enjoy high levels of demand for its services from new and existing customers alike. ‘At a time when the economic climate is more challenging than for some years,’ Brode recently opined, RWS is ‘very well positioned to continue to grow its share of the highly defensive intellectual property translation and services market’.

The Retail Sector

Even in the retail sector, exposed as it is to a decline in consumer spending, it isn’t all doom and gloom. Tim Hall, the managing director of healthy fast-food group Pod, has steered the company to triple-digit growth from January to May. ‘Our plan for the next three years is to develop a more aggressive strategy, because to grow a successful brand in a declining market is easier than growing it in a very competitive one.’

Hall started Pod in 2005 with angel backing of £3 million – ‘the most difficult thing I have ever done in my life’ – opening two stores. Now generating a profit, the aim is to open three additional stores, followed by another ten, ideally over the next couple of years.

‘The specific commercial advantage for a retail business flourishing in this climate is that rents are plummeting. Landlords are either negotiating with their tenants because they’re heading toward liquidation, which is obviously a nightmare for both the landlord and the tenant, or they have vacant properties. If you are able to raise money, lease acquisition and refurbishment puts you in a very strong position.’

Hall notes that investors were generally hesitant about doing anything between October and March, but they’re now realising that this could be the perfect moment to grow a niche business operating in the stale world of fast food. ‘I had a strong view about this sector,’ he says. ‘The whole food model, from supermarket retail to wholesale, is changing as we speak. The model used to be about value and price – five burgers for £1 – but now it’s about quality and integrity.

‘People look at this business and say the fast-food business is worth $120 billion globally. The whole model of burgers, chips and fried chicken is ten years out of date already. If you create a brand in a sector that has a contemporary product with a health-focused menu, then you have that $120 billion at your beck and call.’

Hall estimates the company needs extra funding of around £5 million to take the business to where he wants it to be, and will probably have to go down the venture capital / private equity route. ‘We are certainly going to be in one of our key expansion phases during the current economic climate. And it is tough, particularly in retail.’

For those entrepreneurs with serious ambitions, now is the time to prove it.