The number of firms going bust in the last quarter of 2008 in the England and Wales increased by 220% from the same period last year, according to figures released by the government's insolvency service.

SMEs have suffered the most in the recession, with an increasing number of small firms ceasing trading.

In the last three months of 2008 there were almost 2,500 corporate insolvencies, and just under 30,000 firms were made bankrupt or entered an individual voluntary arrangement (IVA).

"Liquidations in the fourth quarter of 2008 were dramatically up on liquidations in the same quarter of the previous year," said Alan Tomlinson of Tomlinsons, a licensed insolvency practitioner to the BBC.

"It is the small and medium-sized business, which forms the backbone of the UK economy, that has suffered the most and I expect this situation to deteriorate even further in 2009."