SME Business News

The number of UK businesses that are expected to fail in 2009 will increase to 36,000 (one in every 56 businesses), according to the latest Industry Watch report by accountants and business advisors, BDO Stoy Hayward LLP.

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.  But the worst is yet to come, according to the report. It highlights that 39,000 or one in 50 of all UK businesses, are predicted to fail in 2010 as the intensifying recession takes it toll.

Shay Bannon, Head of Business Restructuring at BDO Stoy Hayward commented: “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.”

Very often, the issue facing small businesses is underfunding. The traditional overdraft, which is repayable on demand and  can potentially be withdrawn at any time, has fixed ceilings and can lead to a retrenched entrepreneurial mindset. This can be fatal for the small business, causing them to halt investment and to slip back dangerously. Invoice discounting and factoring are both powerful solutions that enable businesses to grow even in the challenging conditions we see today.