Decline in consumer spending in 2010 will drive up number of business collapses, predicts BDO Stoy Hayward.
The retail sector will suffer the effects of the downturn for longer than other industries, according to accounting firm BDO Stoy Hayward LLP.

The business adviser also predicts that the number of insolvencies will increase in 2010 as a result of a tightening in consumer spending, combined with lower wage growth and reduced consumer credit.

BDO has predicted that a total 4,630 businesses will fail in 2009, rising to 5,070 in 2010.

The company admits that to date, consumers have shown remarkable resilience in the face of the recession, with Q2 retail sales volumes up 0.7% like-for-like and 1.3% compared with Q2 in 2008. However, heavy discounting has taken its toll, leaving profit margins painfully thin for many retailers.

BDO Stoy Hayward retail business restructuring partner Tony Nygate said: "Unemployment has risen less than the economic contraction originally suggested, with a flexible labour market allowing employers to reduce hours and wages rather than make redundancies. These factors have helped maintain retail spending surprisingly well in the face of the recession and have been instrumental in preventing even more retailers going into liquidation."

He added: "However, retailers can expect the worst of the recession to hit in 2010 when rising unemployment and structurally lower consumer credit will dampen prospects."