A period of pressure

Research conducted by BDO Stoy Hayward paints a gloomy picture for UK manufacturing companies, with the number of failures in the sector set to rise by 37 per cent by the end of 2008.

The company’s Manufacturing Industry Watch predicts that the number of failures will rise to 1,841 by the end of this year, compared with the 1,341 failures reported at the end of 2007.

Prospects look poor for 2009 with the report forecasting a further 31 per cent increase in failures.

The firm believes that figures are likely to stay the same throughout 2010 with 2,349 businesses expected to fail.

Tom Lawton, head of manufacturing at BDO Stoy Hayward, said: ‘These figures show the end result of the recent dramatic declines in manufacturing activity and show that many manufacturing companies are entering a period of severe pressure.

‘The key to survival in these tough economic conditions will be optimising cash reserves through all possible means, including cost-saving exercises and working capital management, particularly inventory reduction.

‘Despite the short-term problems, the monetary and fiscal actions being taken should ensure some form of recovery in the not-too-distant future.

‘We believe that UK manufacturing will be part of this recovery and will continue to form a key component of the UK economy.’