Recession to claim one in 56 UK companies

Published: March 21 2009 02:26 | Last updated: March 21 2009 02:26

One in every 56 businesses is expected to collapse this year as the recession intensifies, a leading accounting firm has warned.

BDO Stoy Hayward says the rate of business failures will increase by 59 per cent by the end of this year to 36,000 companies, up from 22,600, or one in 87, in 2008.
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As the UK economy contracts at its fastest rate since the second world war, the firm’s Industry Watch report predicts that more company casualties will follow in 2010. It says 39,000 businesses, or one in 50, are likely to fail next year.

Though all sectors will be affected, construction and property are expected to feel the worst effects of the downturn. The report predicts that 3.2 per cent of companies in the sector, as many as 10,300 businesses, will go under.

Manufacturing will be next worst hit, with 2,300 companies, or about 2.3 per cent of the sector, to close.

Shay Bannon, head of business restructuring at BDO Stoy Hayward, 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.”

The report says the slowdown in consumer spending and corporate demand, coupled with shattered business confidence, has sharply pushed up the business failure rate this year. Investments by companies in their businesses are forecast to fall by 15.6 per cent in 2009 while consumer spending is likely to be down 1.8 per cent on last year.

Mr Bannon added: “Companies are tightening their belts and ... the government is also increasing its initiatives to kick start the economy, and both should have an effect.

“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.”