The number of companies going into administration in England and Wales rose by more than a fifth in the first three months of this year while those going bankrupt leapt 25 per cent, government figures show.

A total of 858 companies entered administration, which usually involves larger corporate entities, between January and March this year, according to figures from the Insolvency Service. This is the second-highest figure since 1998, 54 per cent higher than the previous quarter and 22 per cent higher than first three months of 2007.

Experts said that the trend would continue. Liz Bingham, partner and head of restructuring at Ernst & Young, the accountant, said: “The rise in corporate insolvencies is a first sign of a trend that we think will accelerate in late 2008 and into 2009 as the credit squeeze tightens its grip and constrains demand as well as credit.”

Ken Baird, head of restructuring and insolvency at Freshfields, the law firm, said: “The longer the credit crunch goes on, the harder it will be for many to obtain new finance or renegotiate debts.” There was a 16 per cent annual rise in company liquidations in Northern Ireland while those in Scotland fell 38 per cent.

Retailers, travel companies and pubs were hardest hit by the challenging economic conditions. Ms Bingham said: “Retailers have been suffering considerably and companies connected with housebuilding are also feeling the squeeze.”

In England and Wales 2,125 companies liquidated their businesses in the first quarter of this year, 25.4 per cent more than in the first three months of last year. But total corporate insolvencies rose by just 4 per cent year on year as the number of compulsory liquidations fell 22 per cent.

The deteriorating corporate picture comes as personal insolvencies are set to rise from 106,000 to 130,000 this year. People who became bankrupt or took out an IVA rose for the first quarter since 2006. During the period, 25,264 people became insolvent, 1.7 per cent up on the previous quarter.

While this was 13 per cent lower than 2007's first quarter, experts forecast sharp rises in the rest of the year. The figures were depressed by a spat between banks and IVA providers that has been resolved. As a result, insolvencies are likely to hit new records.

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