The retail sector is under increasing pressure from the credit crunch, with a 335 per cent increase in companies in severe difficulty compared with last year.

A report by restructuring specialist Begbies Traynor for the first quarter of 2008 revealed that 4,258 companies in general experienced critical problems compared with 542 last year.

Retail is due to get worse, with the number of retailers facing critical problems rising 23 per cent in the second quarter compared with the first.

Begbies Traynor executive chairman Ric Traynor said that the retail and construction sectors were expected to suffer during an economic slowdown. However, the rise of problems in other sectors is much less expected. He attributed this in part to credit lines drying up and companies that might have been supported by extended credit up to a year ago now at real risk.

He added: “The statistics show that many other industry sectors are being affected by the current conditions and the gloom is certainly not restricted to those areas.”

Other areas include construction (up 370 per cent on the second quarter in 2007) and IT (up 371 per cent). Financial Services and Property Services have also taken a dive.