Research found that insolvencies in the first quarter of 2008 rose by 21%, compared to the last quarter of 2007, and 17% year-on-year.

In total, 3,359 businesses across England and Wales entered into insolvency in the first three months of the year, as the rising cost of raw materials, low consumer confidence and the credit crunch took their toll.

However, Mike Jervis, a partner in the business recovery services practice at PwC, said the poor economic conditions were not solely to blame.

"Our experience shows that most company failure and insolvency is down to inadequate planning to deal with these more challenging conditions," he said.

He claimed there were four key areas to focus on: reviewing the business strategy to check that it is still relevant; ensuring that adequate finance and cash resources are in place; examining operational capacity to make sure it is employed in profit making areas of the business and managing relationships with staff, banks and suppliers.

PwC's survey comes as the CBI warned that confidence within the manufacturing sector had plunged amid massive price rises, to counter the effect of rising raw material costs.

In a survey, 50% of respondents said average unit costs had increased while only 10% said they had decreased.

CBI chief economic adviser Ian McCafferty said: "Manufacturers are being forced to pass on higher costs to customers by increasing prices and are no longer able to absorb continuous cost increases into their profit margins."