About 1,600 jobs are under threat after The Works, the cut-price book chain, was forced into adminstration yesterday, a move that added to fears of more failures on the high street.

Kroll, the restructuring firm, said that it had been appointed to run The Works' 317 stores in the UK after HSBC, its banker, pulled the plug.

The retailer is understood to have run up debts of more than £20 million amid fierce competition from Waterstone's and WH Smith.

Tim Brookes, chairman of The Works, said a month ago that he was “horribly pessimistic” about the prospects for the high street in 2008. Two weeks ago Dolcis, the shoe retailer, went into administration and Stead & Simpson, its rival, was rescued by Shoe Zone on Monday.

There were also rumours yesterday that Floors2Go, the retailer, had laid off 90 staff after poor sales.

Peter Saville, partner at Kroll, said that he was confident of finding a buyer for The Works and that, in the meantime, it was “business as usual”.

He said: “These stores have a strong brand and are predominantly in excellent locations. Although the retail sector will face some challenges in the coming months, there are plenty of opportunities to succeed and as such we are very hopeful of securing the future of the business.”

Experts said that the move reflected the intense pressure on middle-market retailers, that other chains were close to collapse and that private equity firms appeared to be cutting their losses and walking away from investments rather than refinancing.

Hermes Private Equity funded a £50 million management buyout at The Works three years ago, while Dolcis repaid a £900,000 loan from Epic Private Equity, its owner, five days before it fell into administration.

An industry insider said: “I think the pace of administrations is going to pick up. Dolcis, Stead & Simpson, The Works - these are all fairly non-distinguished chains at the low end of the middle market and the middle market doesn't really exist any more.

“This should be a wake-up call for retailers with a very ill-defined value proposition, and even people like Woolworths.”

The book sector was one of the first to be affected by the internet and the rise of Amazon. In the past two years the biggest chains have invested millions in beefing up their online presence, putting the squeeze on smaller rivals.

The Times revealed yesterday that Asda was about to embark on the largest expansion of its internet operation to achieve a fivefold increase in online sales to £1 billion by 2011.

Fears over the health of The Works emerged last summer when Derek Hine, its chief executive, and Andrew Walker-Smith, the retail operations director, resigned.

Mr Brookes revealed his concern in an interview in December in Retail Week, the industry magazine. He said: “Consumers are really worried this year - footfall is down. I am horribly pessimistic for next year.”

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