Retailers could be looking forward to a bright 2005, says the report

An estimated 16,390 companies, or 1% of firms, will fail during 2005, says business advice group BDO Stoy Hayward.

The group said 17,030 companies were expected to go bust this year, down from 17,540 in 2003 and 19,930 in 2002.

It said in the short-term the number of companies going under looked set to rise in the first quarter of 2004.

The report says this is as a result of sluggish growth in 2003.

Telecoms recovery

It expects 4,650 firms to have gone under during the three months to the end of March, but expects this to drop to 3,890 in the final three months of the year.

The group predicts the fall in business failures will be seen across all sectors, with manufacturing, which is traditionally most vulnerable, showing the greatest strength.

BDO said it expected manufacturing failures to have fallen to 2,550 last year, from 3,030 in 2002.

And the technology, media and telecoms sector appeared to have weathered the worst of the slowdown, with an estimated 2,005 firms going bust in 2003, down from 2,470 last year.

'Positive news'

But it said the service and leisure sector was still struggling to recover during the first part of this year, with the sector expected to have suffered the highest level of failures during 2003 with as many as 3,360 companies going under, nearly 1,000 more than in 2002.

Shay Bannon, business recovery services partner at BDO Stoy Hayward, said: "The uneven growth that has dogged the UK economy has been replaced by stability.

"This is positive news for British business, but companies must not get carried away.

"The economy is still vulnerable to external shocks, particularly the manufacturing sector which depends on international trade to keep its order books full."