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Business failures expected to rise

16/06/2008

Rising prices and the credit crunch will lead to an 18 per cent increase in the number of firms collapsing next year, research suggests.

Data from business advisers BDO Stoy Hayward predicts 19,124 businesses will go to the wall next year – up from 16,168 in 2007.

2008 is expected to see 17,800 firms go bust.

Rising oil prices – now looking set to reach $150 a barrel – along with the tightening of lending from banks amid the credit crunch seem set to hit hard.

Lower consumer confidence and falling house prices are also set to impact firms – as high street spending dwindles.

Shay Bannon, business restructuring partner at BDO Stoy Hayward, said: "Six months ago there was hope that business would feel some respite if the Bank of England slashed interest rates. But spiralling inflation figures now means that this is unlikely in the short term.

"With the number of business failures expected to decrease in 2010, there is light at the end of the tunnel. But until then companies need to batten down the hatches and put in place some tactics to weather the storm."

Business failures are expected across all sectors with the exception of telecoms, technology and media, where efficiency gains are forecast to keep the wolves from the door.

Corporate profit growth is predicted to fall to the lowest level since the 1990s – at 0.9 per cent – compared with 9.5 per cent in 2007.

Today the CBI announced its forecast for economic growth was down 0.4 per cent to 1.3 per cent for 2008.

Meanwhile data from Lloyds TSB show business confidence is at an all-time low.