The number of businesses on the brink of insolvency has sharply increased over the second quarter, a new report reveals.
Figures from Begbies Traynor show that company failures climbed by nearly 17% in Q2 compared to the same period in 2004.
Some 7,602 firms closed their doors for the last time, up sharply from the 6,516 that shut down between April and June 2004.
The Q2 rise in insolvencies is one of the largest in recent years, with firms in the service sector, apart from financial services, construction and IT the biggest victims.
The number of businesses with significant, but not yet critical, financial problems increased only slightly at 1.5% over the same period in 2004.
"Companies in this position can battle on for long periods of time without entering formal insolvency, particularly in the benign economic conditions enjoyed by the UK until very recently," said Nick Hood, from Begbies Traynor.
"However, once economic conditions get tougher, as they inevitably do, companies that are already struggling are among the first to fail. Our advice to businesses that are experiencing financial difficulties is to address realities now not later, because if swift action is taken early, many firms can be returned to sound financial health."
Insolvency levels had been falling for two years until they reversed in Q4 2004 and began accelerating upward.
Regionally, London firms fared better than those across the rest of the UK.
The Department of Trade & Industry (DTI) is expected to release its insolvency statistics for the second quarter on Friday 5 August.
