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The number of UK companies becoming insolvent over the next 18 months is likely to be worse than expected, accountants BDO Stoy Hayward have predicted.
The new BDO Industry Watch report shows an 18% increase in the number of business failures expected between 2007 and 2009, as a result of rising energy and food prices, decreasing consumer confidence, falling house prices and restricted availability of capital.
The document forecasts that insolvencies will rise to 17,874 this year, from 16,168 in 2007 — and the figure will continue to increase in 2009, when figures are expected to hit 19,124 (the highest level since the dotcom bubble burst in 2002, leading to 19,928 business casualties).
For the first time since BDO launched its Industry Watch report five years ago, none of the industries covered are expected to see a fall in business failures before the end of 2009 — when insolvencies in all sectors except technology, media and telecoms (TMT) are expected to rise by more than 10%
The number of failures in TMT is expected to remain flat until the end of 2009, when a decrease is forecast. The impact of the credit crunch on TMT is likely to be mitigated, said BDO, as other companies invest in technologies in an effort to reduce costs and increase efficiency.
BDO business restructuring partner Shay Bannon remarked that the new figures were 'a sure sign that the impact of the credit crunch is going to have a bigger lag than expected on UK business'.
He added: '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'.
