The number of large companies going into administration in the first three months of this year rose by more than a fifth and the total number seeking bankruptcy jumped 25%, official figures revealed today.

The Insolvency Service said 2,125 firms in England and Wales chose to liquidate their business in the first quarter of this year, 25.4 per cent more than in the first three months of last year and 7.1 per cent up on the final three months of last year.

The deteriorating corporate picture comes as personal insolvencies are expected to climb from 106,000 to a record 130,000 this year.

Firms in administration in the first quarter, which includes both large companies and sole traders, rose by more than 54 per cent above the previous three month figure to 858 and by 22 per cent over the same period a year ago.

Ken Baird, head of restructuring and insolvency at Freshfields, the law firm, said: "Companies that were already under financial pressure [are] among the first to throw in the towel."

"The longer the credit crunch goes on, the harder it will be for many businesses to obtain new finance or renegotiate debt obligations.

“For some this may simply result in a temporary liquidity crisis which at worst could force their expansion plans to be put on ice, for others it will boil down to whether solvency and therefore long-term survival can be guaranteed."

While the number of individuals who declared bankruptcy or took out an Individual Voluntary Arrangement (IVA) fell 13 per cent year-on-year to 25,264 they rose 1.7 per cent over the previous three months and are set to soar.

The current figures are depressed by a spat between banks and IVA providers, which has now been resolved and as a result insolvencies are expected to hit new records.

Mark Sands, Director of Personal Insolvency at KPMG says it will take a while for the impact of the settlement to filter through to the insolvency figures.

"We still expect to see a significant rise in IVAs in 2008," he said.

KPMG expect a record 130,000 people to become insolvent this year, up from 106,000 last.

Howard Archer, of Global Insight, an economic consultancy, said: "While the rise in individual insolvencies was relatively modest in the first quarter of 2008, the situation seems set to deteriorate significantly further over the coming months as the financial pressure on many households is increasing appreciably.”

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