The number of business failures in the technology, media and telecommunications (TMT) sector is set to peak at 2,360 in 2010, exceeding levels seen in the aftermath of the dot-com bust, according to the latest Industry Watch report by accountants and business advisors, BDO Stoy Hayward LLP.
The business failure rate is forecast to peak at 1.5 per cent in 2010, higher than the 1.3 per cent seen in 2002.
A sharp contraction in business investments, down by 3.6 per cent in the first quarter of 2009, is among the key drivers for this surge in bankruptcies. In addition, the overall decline in investments is expected to total 15 per cent over the year for 2009.
Alongside the pronounced investment cycle, lending constraints continue to hit business-to-business demand.
“Businesses operating in the TMT sector can expect the worst of the recession to hit in 2010, with our research predicting that over 2,300 TMT businesses will go into liquidation next year, said TMT Business Restructuring Partner at BDO Stoy Hayward, David Gilbert.
“Government expenditure and cost-cutting measures by companies in this sector should mitigate some of the effects in the short and medium term."
He added, "However this shouldn’t lead to over-confidence, as it is equally likely that the inevitable fiscal consolidation will undermine demand from 2011.”
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