Almost 100 businesses a day face going bust as a result of rising unemployment and falling disposable income, according to research from Midlands accountants.
Researchers on the latest Industry Watch report by BDO Stoy Hayward say a record 36,200 businesses will fail in the next year as a result of falling consumer spending.
Jo Wright, business restructuring partner at the firm’s Birmingham office, said: “According to the report, low interest rates and policy measures aimed at boosting the economy are not likely to halt the rate of UK business failures until at least 2011, paving the way for a far worse picture to come in 2010 where a staggering 40,400 – 111 businesses everyday – are expected to go under.”
The report forecasts a four per cent decrease in consumer spending this year which will impact sectors most reliant on disposable income, including retail, leisure and personal services.
One of the main drivers behind falling consumer spending is the decline in employment which is expected to fall by 3.5 per cent in 2009, with a further 1.9 per cent drop in 2010.
Despite falls in mortgage costs and lower inflation, which have been linked to comparatively robust retail sales seen so far this year, the contraction in consumer spending will mean that 4,300 retailers will become insolvent in 2009, a 33.3 per cent increase from 2008, according to the report. This figure is set to peak to 7,335 business failures in 2010.
Business failures in the personal services sector, which includes hairdressers and dry cleaners, are forecast to increase by 55.9 per cent this year to 1,910, and rise to 3,140 in 2010. In the leisure sector, 2,550 businesses are expected to fail in 2009 and 3,690 in 2010.
Private sector investment is set to fall this year by 18.9 per cent as firms delay or cancel capital expenditures on weaker prospects for growth and continued troubles in accessing finance. This will push up business failures in sectors relying on business-to-business demand, such as telecoms, media and technology, where 2,500 businesses are expected to fail this year.