Tech sector to defy bankruptcy bloodbath

Technology, media and telecoms firms will buck wider UK trend, claims BDO

An analyst has tipped the tech sector to resist a wider upward trend in UK business failures in 2012 and beyond.

According to BDO, insolvencies among firms in the technology, media and telecoms (TMT) sector will drop every year until 2015, defying an overall rise in total UK business failures.

Some 1,100 TMT firms hit the wall in 2011, down 15 per cent on 2010, the auditor said in its Q1 Industry Watch report, which projects business failures using data from the Centre for Economic and Business Research.

That number is set to drop fractionally this year, before falling to 1,000 in 2013, 900 in 2014 and 800 in 2015.

"Failures are expected to decline significantly as domestic high-tech firms drive sectoral growth, leading to declining failure numbers," BDO stated.

In contrast, total business failures rose by 5.8 per cent in 2011 to stand at 23,600. That number is expected to increase to 25,600 this year and 25,800 in 2013, before beginning to taper off.

Of the eight sectors listed, TMT was the only one tipped for a decline in insolvencies this year (see graph, bottom), although the number of casualties in the manufacturing industry was predicted to be stable.

And BDO failed to muster much optimism about the wider market.

"Our latest forecasts for the UK economy suggest a modest 0.4 per cent GDP expansion in 2012 – notably lower than the Office for Budget Responsibility's forecast of 0.8 per cent growth," BDO stated.

"Rising unemployment means we expect business failures to swell this year compared with 2011. Failures in 2013 will also be marginally higher than in 2012."