The number of businesses going broke in Sussex and the South-East has increased by 18 per cent since the start of the year, three per cent above the national average.

Across the UK, the increase in failures registered by business information group Dun and Bradstreet (D&B) was 15 per cent.

In the South-East 1,941 firms ceased trading in the first quarter of the year, compared with 1,644 in the same period last year.

The national figure was up from 9,360 to 10,803.

The worst-affected part of the UK was Wales, where the increase was 44 per cent.

Senior analyst Philip Mellor said: "Part of the increase is due to the low base with which these figures have been compared.

"Last year, the first quarter figures were the lowest they had been for nearly ten years. This quarter's figures are only marginally above the total for the first three months of 2000, which was 10,710.

"We will have to wait until the next quarter to be quite sure the trend is significantly upwards."

London was the only area to record a decrease in business failures. Its tally declined from 1,483 to 1,416 - a drop of 4.5 per cent.

Smaller businesses were more seriously affected than larger companies. In the first three months, there was 20.5 per cent increase in bankruptcies of small businesses compared to 9.6 per cent increase among larger companies.

Martin Murphy, risk management consultant for D&B for the south coast area, said: "It is now more important than ever to keep a close eye on customers and suppliers to minimise risk and potential bad debt."

All is not gloom for small firms. Figures from the Department of Trade and Industry showed the UK had some of the best performing small businesses in Europe.

A study, which measured the performances of small businesses across nine European countries, found British firms topped the league, scoring the highest marks in 20 out of 70 categories.

They emerged as having the highest pre-tax profit margin of all nine countries, while UK manufacturers were found to be least likely to fail because they had liquid assets to cover their liabilities if creditors called in their debts.

The UK service sector fared less well, with firms in this area considered to be the most likely in Europe to run into liability problems.

German companies emerged as having the highest number of complaints, while British ones had the least.