Business failures to rise by half next year

The number of UK business failures could rise by as much as 50 per cent next year and will not peak until 2010, auditor BDO Stoy Hayward has claimed.

BDO's Industry Watch report predicts that business failures will be 21,900 this year and will rise to 32,300 during 2009. The number of UK firms going to the wall will peak in 2010 at 32,400. That would represent the highest number of failures since 1992 when 33,900 companies collapsed.

Construction will be the industry hit hardest over the next year, with 6,400 firms predicted to fail. Business services will be the second most affected with 5,700 projected failures, followed by real estate with 3,200 and manufacturing with 3,000. BDO claims measures unveiled in last week's pre-Budget report (PBR) will help save about 1,100 businesses over the next two years.

BDO Stoy Hayward's head of business restructuring Shay Bannon claimed the UK was in better shape to battle the downturn than in years gone by.

"Despite the pessimistic outlook in the short term, the UK economy is in a better position in this stage than in recessions seen before," he said. "Low interest rates and inflation gives the UK strong economic foundations for recovery.

"The PBR measures should act to mitigate some of the effects of the financial crisis intensification and prevent growth falling below the -1.25 per cent limit of the Treasury forecast. But this all seems too little too late for those UK businesses which will not survive the downturn."