50% rise in number of manufacturing company failures; but there’s light at the end of the tunnel

According to the latest Industry Watch report by accountants and business advisors, BDO Stoy Hayward, 2,460 manufacturing businesses will go out of business during the year compared to the 1,600 recorded in 2008. Despite this, the manufacturing sector is likely to be one of the better performing areas of the economy following the downturn, the report says. Recent output figures have shown growth in the sector and further output data from the Office for National Statistics is to be released this Friday 28 August. Going forward into 2010, BDO Stoy Hayward estimates that business failures will drop to 2,090. As the manufacturing industry emerges from the downturn, a variety of factors will signal an improved outlook. Among these are the easing of credit constraints, lower sterling exchange rates and increased domestic and external demand. Kim Stubbs, manufacturing business restructuring partner at BDO Stoy Hayward, 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."