Almost 50,000 firms are expected to fold in the next two years as the economic downturn punishes British business.

The South-East is expected to be the region most affected as the financial services industry continues to suffer.

Sluggish growth and slowing consumer spending will fuel a dramatic rise in company failures across the manufacturing, retail and telecom sectors, the survey suggested.

More than 5,500 business are expected to go into liquidation or administration in the third quarter of 2004, 17 per cent up on the current year.

Consultancy BDO Stoy Hayward which prepared the Industry Watch survey said companies had to recognise early warning signals and restructure to increase the chances of survival.

The findings are yet another gloomy backdrop to this week's pre-Budget report when the Chancellor is expected to cut growth forecasts for this year and next.

BDO business recovery services partner Andrew White in Brighton said:

"The economic slowdown is having a serious impact on the future of Great Britain Plc.

"Thousands of British companies are falling by the wayside as conditions toughen, and this study provides a stark wake-up call to those at their helm."

In the last decade, business failures averaged about 4,500 every three months but this is set to rise significantly in the coming months.

Last year, 1,699 firms in the technology, media and telecoms sector failed and this number is forecast to accelerate to 2,893 this year.

Reduced orders and output have dashed hopes of a recovery in manufacturing and annual failures in the sector are set to rise 28 per cent between now and 2004.

BDO said, however, retailers would also see sharp growth in failures as the consumer boom which took place earlier this year grinds to a halt.

Christmas and the January sales will keep the sector busy in the short-term but the first quarter of next year is expected to signal a slowdown in High Street spending.

Last year 0.6 per cent of retail business failed but this is expected to go up to 0.8 per cent or 1,747 firms in two years' time.

Mr White said to reduce the likelihood of going to the wall, Sussex firms should maintain up-to-date and accurate management information, remember cash is king, concentrate on debit management and seek advice at an early stage. Getting professional help could make all the difference between survival and failure.