UK financial services group Britannic says it will consider a merger as it struggles to cope with falling sales in an increasingly competitive market.

Chairman Harold Cottam said Britannic "had no closed minds" and wanted to increase its size through strategic moves rather than organic growth.

"We would look at a partner that can enable the businesses to grow and prosper and create value for our shareholders," he said.

Some analysts suggested Britannic's announcement laid the company open to a takeover.

Profits at fund management groups have been hit by a global economic downturn and stock market slump, and British fund managers have sought to consolidate to save costs and increase their market presence.

Falling sales and profits

The Birmingham-based company - which sells mortgages, savings and retirement products as well as managing funds - said that before exceptional items for 2001, annual profits fell 17% to �145m because of a drop in new business.

Falling equity markets were blamed for pre-tax losses of �319m in 2001, compared with a profit of �47m the previous year.

Analysts said the announcement of a search for a partner was an admission that the board had gone as far as it could in transforming Britannic, which cut its door-to-door sales force last year to reduce costs.

They said that Britannic did not have the size in any of the sectors where it operates to make a meaningful contribution to profits for the next year or two.

One industry source said that had the markets not been so vicious, acquisition as well as mergers or partnerships would have been on the cards.