One in 56 businesses destined to fail, warns BDO Stoy Hayward
THE number of UK firms expected to fail in 2009 will increase to one in every 56 businesses, according to BDO Stoy Hayward.
The accountant’s most recent ‘Industry Watch’ report forecasts that as the UK economy contracts at its fastest rate since the Second World War, the number of business failures will increase by 59% by the end of this year from 22,600 to 36,000.
But the worst is yet to come according to the study, which warms that 39,000 – or one in 50 of all UK businesses – are predicted to fail in 2010 as the recession takes it toll.
While all sectors will suffer from a rise in business failures the report predicts that those in construction and real estate will bear the brunt the most with some 3.2% (or 10,300 businesses) destined to fail.
This is followed by manufacturing where 2.3% of business in the sector (or 2,300 businesses) are predicted to go to the wall.
According to BDO, the slowdown in consumer spending and corporate demand, coupled with shattered business confidence has played a huge part in the number of predicted failures this year.
Furthermore, investments are forecast to fall by 15.6% in 2009 and consumer spending is likely to be 1.8% lower than in 2009 leading to an overall contraction of the United Kingdom economy of 2.9% this year.
Shay Bannon, head of business restructuring at BDO, said: “The deteriorating economy and expectations of a drawn-out recession has led to a downward revision in the UK outlook and has severely impacted the survival rate of UK businesses.”
However, Mr Bannon said that UK companies were tightening their belts and taking more measures to adapt to the downturn.
“The Government is also increasing its initiatives to kick start the economy and both should have an effect on a glimmer of light eventually being seen at the end of a very long tunnel,” he added.
“However, because of the uncertainty among businesses on how long it will take for an upturn to emerge and lead to a more positive impact on their business, for some, surviving tomorrow, will not be possible.”
