The retail and leisure industry is going to take a big hit this year as consumers continue to reign in their spending.
An abrupt end to the UK consumer boom is expected to push retail business failures up some 23 per cent to 1,178, compared to 2004.
The slowdown, alongside the strong pound keeping tourists away, means 1,223 businesses in the leisure sector are expected to fail in 2005 - a rise of 16 per cent from 2004.
Accountants BDO Stoy Hayward say that their industry watch research indicates an increase in business failures in 2005, up three per cent to 16,360.
The group also believes failures will continue to grow steadily over the next two years. In 2006, the firm predicts about 17,236 businesses will fail - a further five per cent increase.
Dr David Bailey, lecturer at the Birmingham Business School, said that the decline was particularly significant for a region already suffering.
He said: "We've had a twospeed economy in the Midlands for some time with the decline of manufacturing and the rise of the retail industry.
"However, with the general slowdown in the economy we're now seeing a decline in retail and leisure as well.
"I think these figures are certainly making the case for Government to introduce an interest rate cut."
The news was more upbeat for the technology, media and telecommunications sectors, however, which BDO said were gradually picking up.
Property and construction sectors are also seeing a temporary decline in the number of business failures. While the housing market has slowed markedly, a revival of demand for office space, and large public sector projects will help the construction industry to keep afloat, BDO said.
Kim Rayment, partner in BDO Stoy Hayward's Birmingham business centre said: "UK businesses are facing a difficult combination of circumstances as slower economic growth, higher interest rates and increased inflation raise the pressure.
"However, even in 2007, when the economy is forecast to grow by just 2.1 per cent, the number of business failures will be lower than in 2003."
* Executives in the public sector, such as local councils and agencies, were given pay rises of up to 9.5 per cent last year, new figures showed.
The rise took average earnings of top bosses in public bodies to £169,000, while the earnings of chief executives in local government topped the £100,000-a-year mark.