Figures released by the Government's Insolvency Service show a 39% rise in liquidations in England and Wales to 5,055 in the three months to the end of June compared with the same period last year.
However, the figures represent only a 3% increase on the 4,914 liquidations in the first quarter of this year.
The growing number of troubled companies also declined in the second quarter, with 1,027 companies being placed into administration, down from 1,311 in the first three months of the year.
This represents a 9% increase on the same period last year, when 938 administrations were recorded.
Alec Pillmoor, a restructuring and recovery partner at Baker Tilly said:”It’s pleasing to see that the number of administrations reduced from the previous quarter.
“This was anticipated with the extended credit being offered by H M Revenue and Customs and some landlords and support from the banks.
“However, this may be merely delaying problems that will emerge in the coming months as companies take advantage of the extended credit without tackling their underlying problems,” he warned.
Business lobby group the Forum of Private Business (FPB) said a drop in bank lending to small businesses was behind the surge in company closures.
The latest data from the Bank of England shows that lending to small businesses dropped by £14.7bn over the last period – the biggest slump since 1997, when the Bank’s records began. The rate of applications for finance under the Government’s Enterprise Finance Guarantee (EFG) has also fallen.
FPB spokesperson Phil McCabe said: “A variety of factors are contributing to soaring insolvencies, but they all lead to the same major symptom – a lack of cash.
“Or research has consistently shown that demand for finance is not being satisfied by the supply from lenders. When finance is available, it is often far too expensive.”
© Crimson Business Ltd. 2009