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Latest statistics from the Insolvency Service reveal that the number of companies being forced into administration or receivership by their creditors has soared.

According to insolvency experts at accountant and advisory firm PKF, the figures are evidence that the UK economy is on the brink of, if not actually already in, recession. As a result, undervalued companies swamping the market could signal a bargain hunt for acquisitive operators.

PKF's analysis of the Government figures for the first quarter of 2008 show that the number of Administrations rose to 858, 54 per cent higher than the previous quarter and 22.7 per cent above the same period in 2007. According to PKF the number is the second highest quarterly figure since the Enterprise Act of 2002 changed the rules governing administrations.

Meanwhile receiverships rose to 273 in Q1 of 2008 - the highest level since 2003 - 85.7 per cent higher than the previous period and 145.9 per cent higher than a year ago.

PKF’s corporate recovery partner David Merrygold said: “These figures should be of huge concern as they're a barometer of business failure and show that the temperature is rising. While the government chooses to focus on liquidations, which show single digit percentage increases, the numbers of companies being forced into receivership or administration by their creditors is rocketing.

He cited the credit crunch as having an impact and increasingly frugal banks while other creditors are tightening their payment terms, with many starting to demand cash up front for “all but their most trusted clients.”

He added: “The reality is that the thousands of small and medium sized enterprises that make up the backbone of the British economy are going to face increasing difficulty as cash flow is starting to dry up. And most businesses had not expected major fuel price hikes, with gas, electricity and diesel costs in particular adding significantly to their costs.

“Regrettably, I think these figures are the tip of the ice berg and likely to get increasingly worse this year.”

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