The number of businesses going bankrupt has increased by more than 10 per cent since last year, according to official figures from the Bank of England.

During the first three quarters of the year the number of bankrupt businesses reached 36,557.

Brian Cotter, small business spokesman, said: "Small business are the life-blood of the economy. Many towns and villages rely on them completely for services and jobs.

"With bankruptcies up by one fifth under Gordon Brown, business needs a break from the red tape and tax hurdles that are crushing their drive.

"The giant Whitehall machine is simply not delivering for businesses especially in Northern, Eastern and Midland regions where bankruptcy and liquidation figures are dreadfully high and getting worse."

Forum Response: Institute of Directors

Derek Brownlee, tax executive at the IoD, told ePolitix.com: "These are worrying figures. Businesses are suffering an increased tax burden, together with increasing costs for pensions and liability insurance.

"If interest rates increase then financing costs may push more companies out of business even before reduced consumer demand kicks in.

"However increased costs are not the only factor - profitable businesses can go bankrupt due to cashflow problems. It's probably a bit simplistic to simply blame it on taxes and red tape, though these are certainly a factor."