Each week of 2004 is likely to see 310 firms hit the buffers, down from 340 last year, according to BDO Stoy Hayward's industry watch report. Over the year, that will amount to fewer than 16,000 business failures.

But the report warned that number was likely to rise to 16,600 by 2006 as higher fuel taxes and the national minimum wage provide a 'bumpy ride'.

The report also found that tightening purse strings meant the wholesale and leisure sectors would bear the brunt of failures over the next two years.

By contrast, the manufacturing sector is expected to suffer just 2,210 failures by the end of the year, down from 2,440 and the lowest since current records began in 1993.

The overall improved picture was attributed to robust overseas demand and sustained consumer spending.