Manufacturing failures increase but ‘some recovery’ expected

The latest Manufacturing Industry Watch report from accountants and business advisors, BDO Stoy Hayward forecasts that as economic conditions worsen, the number of manufacturing failures will rise by 37% taking the predicted total to 1,841 by the end of this year - a considerable increase from the 1,341 failures seen during 2007. BDO’s head of manufacturing Tom Lawton said the figures showed the end result of the recent dramatic declines in manufacturing activity and demonstrated that many manufacturing companies were entering a period of severe pressure. However, he believed that “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.” “The key to survival in these tough economic conditions will be optimising cash reserves through all possible means, including costs saving exercises and working capital management, particularly inventory reduction,” Lawton went on. Looking further forward, the report predicts that 2,413 manufacturers will fail in 2009 - a 31% rise on 2008’s predicted figure - and are likely to stay at this high level throughout 2010 during which year 2,349 businesses are forecast to fail.