One in 56 businesses will fail this year, says BDO report

The number of UK businesses that are expected to fail in 2009 will increase to 36,000 (one in every 56 businesses), according to the latest Industry Watch report by accountants and business advisors, BDO LLP. 

The 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 per cent by the end of this year from the 22,600 (one in 87) businesses that actually failed in 2008.  But the worst is yet to come according to the report. It details that 39,000 or one in 50 of all UK businesses, are predicted to fail in 2010 as the intensifying recession takes it toll.

While all sectors will suffer from a rise in business failures, those in Construction and Real Estate will bear the brunt the most from the effects of the economic downturn. The report reveals that 3.2 per of all businesses in the Construction and Real Estate sector (or 10,300 businesses) are predicted to fail. This is followed by Manufacturing where 2.3 per cent of business in the sector (or 2,300 businesses) are predicted to go to the wall.

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. According to the report, investments are forecast to fall by 15.6 per cent in 2009 and consumer spending is likely to be 1.8 per cent lower than in 2009 leading to an overall contraction of the United Kingdom economy of 2.9 per cent this year.

Shay Bannon, Head of Business Restructuring at BDO commented: “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.”

“Business failures are set to worsen before any improvement is seen. UK companies however are 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. 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.”

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For more information, please contact Stephanie Aneto at BDO on 020 7893 3073 / 07815 172 048 or email stephanie.aneto@bdo.co.uk

Notes to editors:

Methodology notes
1) Industry Watch is the first study to make projections of total business failures and the business failure rate in Great Britain by sector, based on data for compulsory liquidations, creditors voluntary liquidations, administrative receiverships, administrative orders and company voluntary arrangements (CVA) provided by the Department for Business, Enterprise & Regulatory Reform.
2) The BDO Industry Watch model uses 33 key variables which have shown to be related to business failures by sector. The total number of business failures for Great Britain is based on the aggregated sector forecasts.
3) Annual business failure rates are based on the number of VAT-registered enterprises and cebr have produced forecasts for the number of VAT-based enterprises expected in 2008 to 2012.

About BDO LLP
4) BDO LLP operates across the UK with over 3,000 partners and staff. BDO 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. Each BDO Member Firm is an independent legal entity in its own country. The network is coordinated by BDO Global Coordination B.V., incorporated in The Netherlands, with its statutory seat in Eindhoven (trade register registration number 33205251) and with an office at Boulevard de la Woluwe 60, 1200 Brussels, Belgium, where the International Executive Office is located. In the UK the Belfast Firm is operated by a separate Partnership known as BDO - Belfast.

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

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