Company failures will continue at pre-recessionary levels until at least 2013 despite a fall from last year’s record high, according to new research.
The total number of UK business failures in 2010 is predicted to fall by 18 per cent to 21,600, down from 26,196 in 2009, according to the latest Industry Watch report by Midlands’ accountants and business advisers, BDO LLP.
The report revealed that in 2010, many sectors including property and construction, manufacturing and business services are forecast to see business failures fall by more than a third, while in retail and wholesale failures, are predicted to fall by just over 20 per cent.
However, the report shows that business failures will plateau over the next two years with 20,100 business failures predicted in 2011 and 19,300 expected in 2012.
Jo Wright, business restructuring partner at BDO LLP in Birmingham, said: “The marked reduction in the number of business failures is disguising underlying risks, given the recession. The 2011 VAT rise and above target inflation will mean that the average UK household’s income will continue to decrease, meaning people have less cash in their pockets to spend on the nice-to-haves. This will hit the retail, personal services and leisure sectors the hardest.
“Although the business environment will remain challenging, businesses can take comfort from some encouraging signs in the economy. With the impact of the government’s spending cuts not expected to be felt until 2011, they should seize the moment and invest in expansion sooner rather than later. Large companies which made substantial cuts during the recession are now sitting on strong cash reserves, and are in a good position to make investments.”