Corporate insolvencies are set to hit seven-year highs in 2008 as weak businesses face a potential treble whammy of rent demands, stricter auditing and downbeat consumer spending at Christmas.

Insolvency and restructuring professionals are braced for the sort of level of business failures last seen in 2000-2001, when the dotcom boom turned to bust, and some are recruiting more staff to help cope.
All types of corporate insolvencies - chiefly administration, for firms that can be rescued, and liquidation, for those that cannot - could rise by between 20% and 25% next year, one senior professional source told Financial Mail.

Meanwhile, crumbling house prices are likely to be highlighted in Thursday's November survey from the Royal Institution of Chartered Surveyors.

Last week's quarter-point cut in the Bank of England's official interest rate to 5.5% is thought to have been triggered in part by weakness in house prices, though analysts were sceptical as to whether it alone would be enough to stop the rot.

But while the property market is being shaken by the global credit crunch, there are fears that some companies are already doomed.

According to insolvency insiders, three immediate obstacles threaten the survival of weaker firms.

First, business faces the feared slowdown in consumer spending as households feel the pinch from the credit squeeze - not least because falling home values make them feel poorer - and cut back on spending.

Second, December 25 is the next 'quarter day' on which business rents traditionally fall due. Poor sales in the run-up to Christmas would make this a testing time for retailers.

A third factor is auditing - public companies whose financial year ends on December 31 will need to have their accounts approved by April 30 and auditors are reportedly getting tough on what constitutes a 'going concern'.



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