BDO Stoy Hayward predicts the number of British businesses to fail this year will increase by 59% compared to 2008.

The firm's Industry Watch report forecasts that 2009 will see 36,000 businesses fail (one in 56) compared to 22,600 (one in 87) in 2008.

The firm forecasted even worse conditions in 2010 as the number of failed businesses is predicted to increase to 39,000 (one in 50) by the end of next year.

Shay Bannon, head of business restructuring at BDO Stoy Hayward, said: 'The deteriorating economy and expectations of a drawn-out recession has led to a downward revision in the UK outlook and has severely impacted the survival rate of UK businesses.'

The report says the UK economy is contracting at its fastest rate since the Second World War with construction and real estate to be the hardest hit industries. In 2009 Industry Watch predicts 10,300 businesses in this sector will fail with manufacturing to lose 2,300.

Consumer spending and corporate demand coupled with a heavy hit to business confidence is largely responsible for company failures this year the report adds. Investments are predicted to fall by up to 15.6% this year, consumer spending to drop a further 1.8% compared to 2008 and the UK economy is expected to contract by 2.9% this year.

Further reading:

JD Wetherspoon says pub tax is killing industry

Falling company asset values keep FDs from jumping ship

Recession tempts more to leave UK