Nearly three and a half times as many businesses became distressed last year compared with 2007 as the collapse in bank lending hit Britain hard.

A survey released this morning by Begbies Traynor, the insolvencies specialist, found a 245 per cent rise in the number of businesses in distress compared with a year earlier.

The rapid decline in the fortunes of small and medium-sized companies in particular will alarm politicians who have criticised state-backed banks for failing to lend to smaller companies.

Nick Hood, a Begbies Traynor partner, said: “We are seeing the cumulative effect of a working capital and funding drought that has been going on for longer than people realise. The likelihood is that in 2009 we will see 35,000 corporate failures.”

The Federation of Small Businesses (FSB) has called on banks to open their chequebooks.

“One in three of our members has had trouble accessing finance,” an FSB spokesman said.

Begbies Traynor defines distressed companies as “critical” if they face county court judgments worth more than £5,000 or a winding-up petition, or as “significant” if they face smaller county court judgments, other court actions or overdue or insolvent accounts.

Begbies Traynor’s Red Flag survey found an increase of 82 per cent in the number of companies facing critical problems in the final quarter of last year compared with 2007, with 5,651 companies falling into this category.

The number with significant problems rose by 55 per cent to 197,185 over the same period.

The companies surveyed have turnovers of up to £50 million.

Mr Hood said that smaller companies have been the hardest hit by the downturn in the economy and by the credit squeeze.

He said: “What I have never seen before is the ferocity and the velocity of this recession.”

Recent figures from the Bank of England’s Agents' Report show that more than a third of businesses believe that banks have clamped down on short-term lending.

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