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Construction to bear brunt of business failures rise

The construction and real estate sectors are expected to feel the worst of the economic downturn, according to the latest Industry Watch report by accountants BDO Stoy Hayward.

The report reveals that 3.2 per of all businesses in the construction and real estate sectors (or 10,300 businesses) are predicted to fail in 2009.

In terms of the overall picture, the number of UK businesses that are expected to fail in 2009 will increase to 36,000 (one in every 56 businesses).

The report forecasts that as the UK economy contracts at its fastest rate since the Second World War, the number of business failures will increase by 59 per cent by the end of this year from the 22,600 (one in 87) businesses that actually failed in 2008.

The worst is yet to come according to the report. It details that 39,000 or one in 50 of all UK businesses, are predicted to fail in 2010.

Shay Bannon, head of business restructuring at BDO Stoy Hayward said: “The deteriorating economy and expectations of a drawn-out recession has led to a downward revision in the UK outlook and has severely impacted the survival rate of UK businesses.”

“Business failures are set to worsen before any improvement is seen. UK companies however are tightening their belts and taking more measures to adapt to the downturn. The Government is also increasing its initiatives to kick start the economy and both should have an effect on a glimmer of light eventually being seen at the end of a very long tunnel. However, because of the uncertainty among businesses on how long it will take for an upturn to emerge and lead to a more positive impact on their business, for some, surviving tomorrow, will not be possible.”

Industry Watch makes projections of total business failures and the business failure rate in Great Britain by sector, based on data for compulsory liquidations, creditors voluntary liquidations, administrative receiverships, administrative orders and company voluntary arrangements (CVA) provided by the Department for Business, Enterprise & Regulatory Reform.