THE number of companies failing is at its highest for three years and there are fears the figure could rise further in the next year.

Financial analysis group Experian said the retail and business services sectors were among the hardest hit as corporate insolvencies jumped by 11 per cent last year to 18,122.

Companies were already struggling with rising interest rates, the consumer slowdown and increased red tape at the start of last year and were then hit by a rise in energy prices. Among the highest profile failures were car maker Rover, department stores chain Allders and, more recently, the Unwins off-licence chain and van maker LDV.

The Experian report was published on the day that the Office for National Statistics (ONS) announced that the overall profitability of companies outside the financial sector fell to 13.4 per cent in the third quarter of last year.

That compared with 13.8 per cent between April and June, with a net rate of return for manufacturers of 6.2 per cent in the third quarter, down from 7.9 per cent previously.

The figure for the service sector was 16.6 per cent.

Richard Lloyd, managing director of Experian's business information division, said the number of corporate failures during the past month indicated "just how fragile some sections of the economy are as we move into the New Year".

He said: "We are forecasting that corporate insolvencies will continue to rise in 2006."

During the past 12 months, voluntary liquidations and compulsory liquidations rose by 7.4 per cent to 9,083 and 14.4 per cent to 5,493 respectively. Together, they account for four-fifths of all corporate failures.

Receiverships fell by 31.7 per cent, but the number of companies being placed in administration rose by 44.3 per cent to 2,356.

Administration is designed to protect companies from their creditors while a restructuring plan is completed.