BBC Business Correspondent Keren Haynes: Worst hit was the East Midlands area

The research group Dun and Bradstreet says the failure rate went up by more than 6% in 1998, and seems likely to get worse.

It is thought the high cost of the pound and a slow down in the world's economy are to blame.

Some 200 more UK companies are going to the wall each month and failures may well continue rising well into the new year.

Dun & Bradstreet, the credit information company, said 38,634 businesses failed in 1998, compared with 36,368 last year.

It is the first annual rise since 1992.

Dun & Bradstreet analyst Philip Mellor said: " The collapse of world markets, and the strong pound are the main contributors.

"You have had company start-ups failing as you would in good times, but their problems have been compounded."

Buy-outs go bust

Recent interest rate cuts are not thought to kick-in with any real effect for struggling firms until the middle of next year, owing to the slack in the economy.

Another report, completely separate, shows the number of management buy-outs and buy-ins going into receivership in 1998 hit its highest level since 1995, with 62 companies affected, according to the Centre for Management Buy Out Research.

Receiverships among these types of companies had been falling since the peak of 124 in 1991.

It reached a low of 47 in 1997.

But the survey suggests that more than 30% of management buy-ins during 1998 went into receivership compared with 22% of buy-outs. For some observers, this proves buy-out teams' knowledge of a business is a great advantage over those from the outside who take over a firm.