BDO

The firm’s Industry Watch report forecasts that as economic conditions worsen, business failures will rise to 21,900 by the end of this year and to 32,300 in 2009, to a peak of 32,400 in 2010. The 2009/2010 figures would follow the highest annual rate of business failures recorded since 1992 when 33,900 businesses failed.

According to the report, the sector that will suffer the most by mid 2009 is Construction where a predicted 6,400 businesses will fail. This is followed by business services (5,700), Real Estate (3,200) and Manufacturing where 3,000 companies are predicted to fail.

Despite the gloomy projection, UK business should draw confidence from the economy being in a different position than in previous recessions, suggests Gary Hanson, Lead Partner at BDO Stoy Hayward in Cambridge. He says: “Despite the pessimistic outlook in the short term, the UK economy is in a better position in this stage than in recessions seen before. Low interest rates and inflation gives the UK strong economic foundations for recovery.”

Measures announced in the Pre-Budget report will go a little way to drive down these numbers, according to the report. A predicted 1,100 businesses will be saved through the newly announced fiscal stimulus. Without these changes, the number of business failures would rise to an estimated 33,500.

According to the report, consumption growth is set to fall to 1.0 per cent by the end of this year as the economy starts to retract and consumers tighten their belts. But much worse is to come in 2009. Rising unemployment and weakening earnings growth will be compounded by increases in savings. Falling inflation will only partially offset these effects as consumption in 2009 is predicted to decline by 1.5 per cent and GDP is expected to contract by 1.0 per cent.

Gary continues: “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.”

Gary adds: “All sectors across the economy will be hit over the next eighteen months as all businesses feel the impact of the challenging environment. It is important that businesses now, more than ever, focus on managing and sustaining their cash flow and find ways of effectively meeting the needs of consumers.”





BDO Stoy Hayward LLP operates across the UK with over 3,000 partners and staff. BDO Stoy Hayward LLP is a UK limited liability partnership and the UK Member Firm of BDO International. BDO International is a world-wide network of public accounting firms, called BDO Member Firms, serving international clients. Each BDO Member Firm is an independent legal entity in its own country. The Belfast Firm is operated by a separate Partnership.

BDO Stoy Hayward LLP and BDO Stoy Hayward - Belfast are both authorised and regulated by the Financial Services Authority to conduct investment business.

BDO Stoy Hayward is an award winning firm. Recent achievements include:

· Best Workplace UK - Financial Times 2008
· 100 Best Companies to Work For - The Sunday Times 2008
· Audit Team of the Year – Accountancy Age Awards 2008
· Tax Team of the Year – Accountancy Age Awards 2008
· Corporate Finance Deal of the Year – Accountancy Age Awards 2008
· Employer of the Year – Accountancy Age Awards 2007
· The Women of Achievement Award – Women in the City 2008
· Top 50 Where Women Want to Work - The Times 2007
· Business Superbrand - Business Superbrands 2008


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For more information contact Stephanie Aneto in the BDO Stoy Hayward press office on 020 7893 3073, Email: stephanie.aneto@bdo.co.uk