Begbies Traynor, the Manchester-based insolvency specialist, in their latest Red Flag Alert, showed there were 148,000 UK companies experiencing significant, or critical financial problems during the last three months of 2010, up 20 per cent on the previous quarter and four per cent on the same period in 2009.

More than 60,000 struggling businesses were in industries exposed to public sector spending, including IT, construction, recruitment, advertising and business services, up 24 per cent on the third quarter of 2010, said Begbies.Over 10,000 were in the retail sector, an increase of 17 per cent on the previous three months, and there was a 30 per cent spike among wholesalers to 6,520, as retailers squeezed suppliers' margins because higher commodity prices proved difficult to pass on to consumers.

Corporate failures in 2009 were 23,500 and this figure is expected to be around 10% higher overall in 2011 with the majority of these  being the small and very vulnerable businesses.During the last three months of 2010 over 148,000 companies were experiencing either difficult or critical financial problems, up 20% on the previous quarter

Those with critical problems and facing court action with county court judgements of £5,000 or more, had over £52 billion of liabilities.

Chairman Ric Traynor said

"For smaller businesses, we are entering the darkest hour before the dawn, as they face the dual challenges of weak domestic demand and greater pressures from larger competitors and business customers looking to preserve their own profitability.