Gamasutra has an interesting interview up with Jason Kingsley, who is CEO of UK-based developer Rebellion (responsible for games like Alien Vs. Predator and Judge Dredd). It's an enlightening look at one of the mid-sized companies who is currently "turning down loads of work." Kingsley also has some interesting things to say about having IP rights as far as the eye can see, as well as the difficulties that come along with ramping up the size of your company - it's a good sign, but comes with its own flip side.
As for some of those other [UK companies that have gone under]you mention, you get the impression when they looked at the future, they didn't believe the bad times were coming. I think you have to be realistic and you have to make strong management decisions early. But so far, so good. There's no shortage of new projects.
Rebellion "has just finished the PSP version of Harry Potter and the Order of the Phoenix for EA, and is working on various SKUs of The Simpsons Game. Its main Oxford HQ is also developing PSP-only Star Wars Battlefront: Renegade Squadron for LucasArts, while its Derby office is working on Vietnam-set zombie-shooter Shellshock 2 for Eidos." That's a lot on one plate and it seems no surprise that they have the luxury of turning down projects left and right.