The gloomy prediction is made in accountants BDO Stoy Hayward's Industry Watch report. It forecasts that business failures will rise by 9% next year to almost 17,700, while economic growth will slow to 1.8%.

Manufacturing, retail, property and construction and the service sectors are expected to be hardest hit, Ananova reported.

Consumer spending growth is predicted to slow as interest rates bite and people opt to save rather than spend, the report said.