The number of people claiming personal bankruptcy rose by 22.2 per cent, in the first three month of 2008. A total of 19,100 cases of personal debt were noted.

In addition to this, there were also 29,444 individual insolvencies in England and Wales in the fourth quarter of 2008 – a rise of 18.5 per cent on the previous year, data for the from the Insolvency Service show.

In total, individual insolvencies rose by 18.5 per cent – as the UK entered recession and financial problems grew too much for thousands. More worryingly finding for the economy as a whole, showed that the number of firms facing liquidation rose by 51.6 per cent.

Things to get worse before getting better

Alan Tomlinson, at the insolvency practitioners Tomlinsons, said: "The appalling economic conditions are claiming more and more victims, as companies in all sectors make redundancies or simply fail. In recent news, figures released, show that unemployment in the UK is around 1.97 million; such levels have not been seen since 1997.

"Since the first week of January, the number of people in financial difficulty seeking advice from us has increased significantly. Many are struggling with debts or a mortgage that they took on during the good times, and which are now proving insurmountable,” Tomlinson said.

He added that the numbers of personal insolvencies are expected, to continue to rise throughout 2009 and for the numbers to get worse before they get better.

Mr Tomlin also added: "It's essential that people take action as soon as possible if they are starting to struggle. The worst thing to do is stick your head in the sand and hope it will go away.”

He advised people to seek advice if they were starting to fall behind on mortgage payments, or having to live off credit cards, which could borrows into debt.

Sound companies in grave danger

Howard Archer, the chief UK economist at Global Insight gave the impression, that companies are not out of the woods just yet, as he said that the rise in company failures was likely to soar, as the economy heads through recession, "particularly as a number of essentially sound companies are still in grave danger of going under due to cash flow problems and difficulty in accessing credit.”

He said: "Much will depend on how quickly the successful the various initiatives are over the coming months in getting credit flowing to businesses again."

He added: "Deep economic contraction, sharply rising unemployment, higher debt levels, lower equity prices, and more and more people being trapped in negative equity will exact an increasing toll over the coming months.

He continued: "While the substantial cuts in interest rates by the Bank of England will obviously help some people, they are likely to be insufficient to save many from insolvency."

Dr Archer also added that many how had stretched themselves to buy a property would be particularly vulnerable.

He concluded by stating: "Obviously the more that house prices fall, the more people will be trapped with negative equity. And it is those people with the weakest credit ratings that are being hardest hit by tighter lending conditions and more punitive terms."

In addition to this, the Governor of the Bank of England, Mervyn King said that the recession was likely to be longer and deeper than previously thought. He also said that inflation was expected to fall to 0.5 per cent during the year, meaning that prices of goods will fall for consumers, but stores will be less likely to earn bigger profits, thus causing them to slip into debt.

signs of hope

Despite the economic downturn, retailers on the high street showed sign of improvement. Department store John Lewis took in sales of more than £48.5 million; a rise of four per cent, in the 17 weeks to January. The department store stated that stong fashion along with electronics and home technology sales, were key factors to the proficts the store made. Retail operations director Patrick Lewis said: "Healthy sales of our final clearance lines were well supported by the early arrivals of the new season stock.”

Sales in the supermarket, Waitrose were up to £74 million, a 0.8 per cent rise. Another supermaket reaping the benefits was, Sainsbury's saw like-for-like sales increase by 3.9 per cent for its third quarter, ending on January 3rd 2009. their total sales increased by 4.8 per cent.

Justin King, the CEO of J Sainsbury, said: "Sainsbury's good trading performance has continued over the past 13-weeks resulting in like-for-like sales growth, excluding fuel, of 4.5 per cent, with our best ever Christmas performance completing a good overall third quarter."