The number of West Midland companies facing possible insolvency has shot up by 43 per cent in the past 12 months as the credit crunch begins to bite, a survey has shown.

It was the biggest single increase of the eight British regions (including Scotland and Wales) and compared with 15.3 per cent in the North West and Wales, the area with the lowest rise .

Overall, the number of businesses facing "significant difficulties" has risen from 4,201 this time last year to 5,159, an increase of 23 per cent.

The figures were calculated by corporate rescue specialist Begbies Traynor for its latest quarterly Red Flag Alert which monitors corporate distress signals such as county judgements and wind-up petitions and other signs that companies are in trouble.

Begbies breaks its findings down into companies with "significant problems" - those with either a court judgement against them or out of date accounts - and those with "critical problems" such as county court judgements totalling £5,000 or more or facing wind-up petitions. It says 15 per cent of the latter will be insolvent within a year.

The situation deteriorated in the final quarter of 2007 as the impact of the credit crunch created by the sub-prime lending crisis in the US began to make itself felt.

"The combination of adverse economic conditions in the final quarter of 2007 has clearly had a major impact on credit conditions, with a significant reduction in credit availability and an increase in defaults," Ric Traynor, chairman of Begbies Traynor said.

"This trend is expected to continue into this year and will undoubtedly lead to reduced lending, which in turn could push more companies into solvency over the coming months." ..SUPL: