Worsening economic conditions could see an 18% rise in the number of companies going out of business in the UK, business advisory firm BDO Stoy Hayward has warned.

The organisation predicts an increase from 16,168 in 2007 to 19,124 in 2009, representing the highest level since the internet boom failed in 2002.

It is also warning that profit levels will fall to 0.9% from 9.5% in 2007, the lowest level since the early 1990s.

"This is a sure sign that the impact of the credit crunch is going to have a bigger lag than expected on UK business," said Shay Bannon, business restructuring partner at BDO Stoy Hayward.

"Six months ago there was hope that business would feel some respite if the Bank of England slashed interest rates. But spiralling inflation figures now means that this is unlikely in the short term."