Last year, the bankruptcy rate for small businesses increased by 26 per cent as higher running costs caused companies to crash.

With small businesses having "less scope for error" in their profit margins, they are likely to suffer.

The sectors that struggled the most were the financial services, hospitality and leisure and recruitment and business support services.

Indeed, recruitment and business support saw almost a 90 per cent increase in administration declarations, according to the study conducted by Deloitte.

Regulation from the Financial Services Authority, professional indemnity insurance costs and additional audit burdens could have caused the expense of running a business to escalate, experts claim.

Neville Kahn, reorganisation services partner at Deloitte, commented: "Overall, the figures suggest the economy is not as healthy as it might seem on the surface."

Smaller businesses often have problems generating the capital to see them over an unsteady period in the market and can collapse under financial pressure.

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