The number of businesses going bust in England and Wales rose by 15 per cent to a five-year high in the three months to June as the economic downturn forced increasing numbers of bars, clubs and property companies to the wall.

A total of 3,560 concerns were liquidated between April and June, up 15 per cent compared with the same period last year, and the highest since 2003. Economists said that the number was set to increase further.

The number of businesses going into administration, which typically involves larger companies, also spiralled, rising by 60 per cent to 938, up from 585 in the three months to June last year.

The number of administrations in the first six months of the year was 42 per cent higher than the first half of last year.

Geoff Carton-Kelly, head of restructuring and recovery at Baker Tilly, the accountancy and business advisory group, said: “A sharp drop in discretionary spending is having a direct impact on insolvency figures, with leisure companies featuring highly, as well as property developers.”

Howard Archer, of Global Insight, the economic consultancy, said that businesses were failing because of a combination of higher costs, slower demand and tighter credit conditions.

He forecast that increasing numbers were set to go bust: “Company liquidations seem certain to trend significantly higher over the coming months, given that recession is now looking more likely than not.”

Nick Wood, recovery and reorganisation partner at Grant Thornton, the accountant, said: “Businesses that a year ago had been able to paper over the cracks are now being fully exposed. Unfortunately, this feels like just the beginning.”

Companies in Scotland were more resilient, with a 20 per cent decline in the number of insolvencies year on year, while 57 companies in Northern Ireland became insolvent in the three months to June, a rise of 50 per cent.

However, while the number of individuals going insolvent rose by 35 per cent in Scotland and 41 per cent in Northern Ireland, it fell by 8 per cent in England and Wales.

A total of 15,297 people in England and Wales became bankrupt in the second quarter, down from 16,214, while the number of people entering an individual voluntary arrangement (IVA), which allows borrowers to pay off only a portion of their debts, fell by 12.4 per cent to 9,256.

The number of IVAs has also been depressed by a sharp rise in debt management plans, more informal agreements between borrowers and creditors that allow lenders to recoup a greater slice of the debt than IVAs.

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