Research claims bankruptcies set to drop

The number of businesses going bankrupt in Britain is set to fall over the coming two years despite the rise in oil prices, research claimed today.

Just 15,830 firms are expected to go under during 2006, down from 17,550 in 2003, according to business advice group BDO Stoy Hayward.

The group said the expected fall suggested inflated oil prices would not be as damaging as originally feared.

It added that economic growth and renewed business investment was likely to start filtering through to firms by the end of this year, reducing the number of failures for 2004 to 16,360 or around 1% of companies.

But it said in the short term companies had suffered from a slow down in consumer spending following interest rate hikes by the Bank of England.

As a result it said the number of companies going under fell only slightly during the first three months of the year to 4,130 from 4,210 during the previous quarter.

Shay Bannon, business recovery services partner at BDO Stoy Hayward, said: “While the high oil prices that we’re currently seeing look set to increase inflationary pressures and may shave some points off world GDP growth, they are unlikely to increase business failures in the UK in the long-run.

“This will be reassuring to businesses looking to expand. However, companies in the most vulnerable sectors, for example leisure companies, should seek advice before planning to grow.”

The group said the global recovery was filtering through to almost all industry sectors, with the service sector looking set to particularly benefit.

But it added that the leisure sector was still lagging behind, with the number of firms likely to go under looking set to rise in 2004 to around 1,263, compared with 1,120 in 2003.

In the manufacturing sector it expects 2,240 companies to go bust during 2004, the equivalent of 1.9% of firms, down from 2.1% in 2003.