The number of companies going bust is expected to soar in the coming months after official figures showed corporate insolvencies had increased dramatically to their highest point for five years.

Company liquidations jumped by a quarter in the past three months as businesses struggled to cope with a slowdown in consumer demand, falling property values and tight credit conditions imposed by banks. The Insolvency Service said yesterday there were 4,001 voluntary and compulsory liquidations in England and Wales between June and September, a 10.5% rise on the previous quarter and an increase of 26.3% on the same period a year ago.

Personal insolvencies also rose strongly and were heading above 100,000 over the next year. There were 27,087 individual insolvencies in the three months to September, a rise of 8.8% on the previous quarter and an increase of 4.6% on the third quarter last year. Personal bankruptcies jumped by 17,341 while another 9,746 accepted an individual voluntary arrangement, the controversial payment plan with creditors that allows individuals in financial distress to avoid bankruptcy.

Opposition MPs said the figures represent a failure of government policy and confirmed that the economy was heading into recession.

The International Monetary Fund warned on Thursday that the UK would suffer most as the financial crisis gripped the world's rich economies and forced them to shrink for the first time since the second world war.

The Tory business spokesman, Alan Duncan, said a sharp rise in unemployment was "causing huge pain to already hard-pressed families and small businesses".

The Tories and Liberal Democrats argued the government had failed to support businesses during the downturn and to prevent a large rise in companies tipping over into insolvency.

Accountants Grant Thornton said yesterday's figures were "the tip of the iceberg". It said: "Genuine fears are now growing as to the depth and longevity of the impending recession. We predict significant increases in these figures in the next quarter and beyond."

The Insolvency Service said more businesses will go under in the coming months, despite a fall in oil prices and other costs. The Bank of England's 1.5 percentage point cut in base rates was unlikely to influence events in the short term. The Insolvency Service said: "Although lower energy and commodity prices are easing the pressure on input costs, company liquidations seem certain to surge over the coming months, given the likely depth and length of the recession."

Ministers have come under pressure to force high street banks to increase lending to small and medium sized businesses caught out by the credit crunch. Business secretary Peter Mandelson is due to meet bank executives later this month for a showdown over recent hikes in interest rates and restrictions on lending.



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