Business failures seen set to rise by 18 pct

LONDON (Reuters) - Business failures are forecast to rise 18 percent between 2007 and 2009 as the credit crunch and rising food and fuel prices take their toll, a report showed on Monday.

Some 17,874 businesses will become insolvent in 2008, up from 16,168 last year, and the figure will rise to 19,124 in 2009, the report by BDO Stoy Hayward forecast.

That would be the highest level since the dot.com bubble burst in 2002, which saw 19,928 business failures.

The forecast rise in failures is significantly worse than the 11.4 percent increase projected in December.

Profit growth is also expected to slow to 0.9 percent in 2008 and 2009, down from a record 9.5 percent last year and the lowest level since the early 1990s, the report said.

"This is a sure sign that the impact of the credit crunch is going to have a bigger lag than expected on UK business," Shay Bannon, business restructuring partner at BDO Stoy Hayward, said.

"Six months ago there was hope that business would feel some respite if the Bank of England slashed interest rates. But spiralling inflation figures now means that this is unlikely in the short term."

Britons' expectations of future inflation rose to a record high of 4.3 percent in May, above market expectations and more than a percentage point above the actual rate, a survey by the Bank of England showed on Thursday.

The last reading for consumer price inflation was 3 percent in April and the Bank has forecast it could spike to around 4 percent.