Firms 'to go bust at rate of 400 a week'

More than 400 companies will go bust every week for the next three years, according to a gloomy prognosis by a firm of corporate advisers published today.

A total of 63,000 UK businesses will fold by 2006 as the consumer spending slowdown forces a shake-out of the poorest performers, BDO Stoy Hayward's Industry Watch showed.

The report said business failures rose by 6 per cent last year, with 19,928 firms folding compared with 18,783 in 2001.

Quarterly business failures are set to fluctuate between 5,000 and 6,000 over the next three years compared with an average 4,000 to 5,000 since 1994. The annual rate could hit 24,000, or 461 a week.

The biggest casualty will be the wholesale sector, where failures will rise by 47 per cent from 227 in the final quarter of 2002 to 333 in the last quarter of this year. The travel and transport sector will suffer the second-biggest rise. BDO Stoy Hayward predicts that over the same period, failures will rise 35 per cent.

The beleaguered manufacturing sector will continue to make up the largest share of failures, with business failures exceeding 1,000 a quarter. In the short term, business failures will grow by 20 per cent from 750 in the fourth quarter of 2002 to 952 in the fourth quarter of 2003.

The only industry sector set to see a fall in business failures over the next year is the services sector. Industry Watch predicts 1 per cent (3,001) of the sector's businesses will fail in 2003. As economic recovery begins quietly in 2004, failures will slow to around 600 a quarter in the latter half of the year, dropping below 600 in 2005, it said.

Retailers will also suffer as consumer spending falls, with 1,734 retail businesses (0.6 per cent) collapsing in 2003, rising to 1,810 in 2004 (0.8 per cent) before falling back in 2005.