More businesses have weathered the recession than experts predicted, with failures peaking in the first quarter of last year.

Shay Bannon, head of business restructuring at BDO, says: ‘Historically business failures are lagging indicators and continue rising well after the economy has turned. So we were surprised to see that [they] rose far less than expected through this recession and indeed less sharply than during previous recessions.’

According to a report from BDO, reasons for the decline in insolvencies after the first quarter were due to the government’s tax deferral ‘time to pay’ scheme, falling mortgage and interest costs and the impact of reduced VAT on consumer spending.

However, Bannon adds that more needs to be done to prevent a second wave of business failures: ‘A government of any colour must recognise that enterprise is the UK’s engine room and so any increases in VAT or tax reforms hinder [our] competitive global standing.’

The  total  number  of  business  failures in 2009 was  26,165,  an  increase  of  16 per cent compared  to  the  previous  year  and  up  by  59 per cent compared to  2007.

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