A high street spending slowdown contributed to a second consecutive quarterly rise in business failures in the first three months of this year, according to new research.
The West Midlands was well up and must fear even worse results in the months ahead in the wake of the MG Rover crisis.
Credit checking group Experian said the trend was set to continue, particularly in the automotive sector.
The motor traders' industry was one sector to see a decline in business failures, but Phil Cotter, managing director of Experian's Business Information division, said the demise of MG Rover threatened to turn that around in coming months.
"It's bound to cast a shadow. There is a combination of things happening now which makes the outlook for that sector fairly uncertain," said Mr Cotter.
"We would anticipate further liquidations or insolvencies as a direct result of Rover's collapse through their supply chain. A lot of small businesses are also obviously going to suffer as a result of Rover closing down."
Mr Cotter said the fallout from Rover's collapse would be felt throughout the West Midlands, which recorded 372 business failures in the first three months of the year - up
8.8 per cent on 2004.
Nationally, lower consumer confidence and spending helped to boost company failures to 4,168 in the first quarter, compared with 4,092 in the same quarter last year, said Experian.
Corporate failures rose by 0.2 per cent in the fourth quarter of 2004 and the rate accelerated in the first quarter of this year to 1.9 per cent.
Voluntary liquidations increased by two per cent over the same period - the first time they have risen in more than two years.
The latest insolvency figures reflected current market conditions and illustrated some of the threats that businesses, especially in certain sectors, were experiencing.
In particular, lower consumer confidence and spending had hit the retail industry hard.
Declines in sales of household goods and business by catalogue and internet retailers caused retail sales volumes in March to fall by 0.1 per cent against revised growth of 0.3 per cent in February, official figures showed last week.
Non-food retailing saw a year-onyear increase in business failures of nearly 30 per cent and food retailers fared even worse, with an increase of 53 per cent.
The recent scare sparked by the illegal use in food of the Sudan 1 dye and increasing competition from major companies in the convenience sector may have played their part in the difficulties faced by retailers.
Retailing was among 15 of the 34 industries surveyed by Experian that showed an increase in business failures in the first quarter.
Sharp increases were also recorded in the servicing and repair sector, agriculture, forestry and fishing, hiring and leasing and building and construction. Business failures declined in 14 industries, including printing, paper and packaging, post and telecoms, leisure and hotels and information technology.
By region, Yorkshire and Humberside had the highest increase in business failures at 13 per cent to 399, while the South-east (seven per cent up at 915), and Scotland (three per cent up at 180) also recorded increases.