The chief executive of the UK's biggest independent corporate insolvency practice warned yesterday that up to 30 per cent more companies could go bust this year compared to in 2007 as the country's economy weakens and credit from banks dries up.

Rik Traynor, the executive chairman of Begbies Traynor, said insolvency work at the firm had risen 33 per cent so far this year and that over 20,000 companies could run into financial difficulties over the course of 2008.

He said since November there had been a "material, almost dramatic" increase in the number of companies having financial difficulties with the property, construction, and retail sectors worst hit.

Mr Traynor also expressed concern that more jobs were likely to be lost as administrators found it more difficult to find buyers for troubled companies due to the wider economic environment.

The company, which handles around one in ten corporate insolvencies in the UK, has suffered in the last year with business drying up to an all time low in 2007 as troubled companies were bailed out by credit from banks. However, with banks now less inclined to lend the insolvency industry is experiencing a boom as fewer companies get a second life from their banks.

As a result of fewer companies falling on hard times last year, combined with significant investment in its business to ready itself for the rush, Begbies yesterday posted lower annual pre-tax profit of £5.7 million for the 12 months to April 2008, down from £8.5 million the year before.

However, the group’s results beat City expectations with analysts endorsing the company’s decision to retain and increase staff numbers during the quite period in anticipation of an up turn in business.

Mark Fleetwood, an analyst at Brewin Dolphin, said that all suggestions pointed to a substantial increase in insolvency work and that the company would start to see the benefits of positive operational gearing.

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