The number of companies going out of business fell by 7% in 2007 compared to the previous year, according to figures released by Deloitte.

But the organisation believes the impact of the credit crunch is only just beginning to filter through to companies and expects the number of insolvencies to rise in 2008.

"Until recently there was a relatively positive environment with insolvency appointments in decline and businesses worked together with lenders to restructure and refinance, without an insolvency event occurring," said Lee Manning, reorganisation services partner at Deloitte.

"We are entering a more demanding credit phase where the prospects of solvent rescue will be reduced."

The sector that saw the biggest rise (15%) in bankruptcies in 2007 was hospitality and leisure, with increasing price competition from supermarkets and the growing popularity of entertaining at home to blame.

Deloitte expects the failure of all four home nations to qualify for this summer's European Championships football tournament to further increase pressure on this sector.