Manufacturers ‘out of business’

Around 2,460 manufacturers will go out of business by the end of the year, with output likely to remain below pre-recession levels, according to a recent Industry Watch report.

The report by business adviser BDO Stoy Hayward suggests that low manufacturing output in 2009 will lead to 860 more business failures compared with a year earlier.

However, the group said that, despite the gloomy outlook for the year ahead, the manufacturing sector is forecast to be one of the better performing industries during the upturn.

Kim Stubbs, manufacturing business restructuring partner at BDO, said: ‘There are evidently still challenging times ahead for the manufacturing sector, with high levels of business failures expected in the coming months.

‘But the inventory cycle has a key role to play in the recovery and businesses that draw their destocking to a close and increase their inventories will contribute significantly to the rebound in the industry. This, alongside reduced restraint on credit and lower sterling exchange rates, signals light at the end of the tunnel for the manufacturing sector.’

The figures were based on data provided by the Department for Business, Enterprise and Regulatory Reform on liquidations, administrative receiverships and company voluntary arrangements.

BDO highlighted 33 key variables that related to business failures by sector to estimate the number of aggregated failures in each industry.

Looking ahead, the report estimated that business failures would drop to 2,090 by 2010 as a result of easing credit restrictions, lower sterling exchange rates and increased external demand.