The number of business failures north of the border will surge by 20% in 2008 as the effects of the global credit crunch come home to roost, according to the predictions of one of Scotland's leading corporate recovery specialists.

David Hunter, the head of business recovery and insolvency at the Scottish chartered accountancy practice Campbell Dallas, told The Herald: "Businesses are already finding it more difficult to operate in the current economic environment.

"Suppliers are finding it particularly difficult to pass on rising costs to their customers. That's the first part of the problem.

"At the same time, banks are not as generous as they used to be, and because of the way they've tightened up their own practices, they're accelerating the end for businesses that are already struggling."

According to the latest UK insolvency figures, released at the end of last week, Scotland recorded a surprise fall in corporate failures over the past year - in spite of an increase in England and Wales.

A total of 170 Scottish firms went into liquidation, receivership or administration in the first quarter of 2008, compared with 192 in the first three months of 2007, a fall of 11.5%, and an annual fall over the 12 months of almost 9%.

However, many observers believe the full impact of the global credit crisis, which has its roots in the defaults on home loans by US households with poorer credit ratings served by the sub-prime mortgage sector, has yet to trickle down to small and medium-sized enterprises.

A 20% increase in the number of companies falling into liquidation would take the 2008 Scottish total to almost 650, compared with 539 in 2007, assuming Hunter's dire prediction comes true.

While the increase would mark the first Scottish rise in corporate insolvencies in six years, the figure is still well behind 2002, when there were 788 corporate insolvencies in Scotland.

Meanwhile, the hardest-hit sector in 2008 is expected to be the wholesale and retail trade.

Hunter said: "A credit crisis like this takes time to work through the system. As insolvency practitioners, we'll see these problems a year down the road - more administrations and more liquidations.

"The banks have become very cautious about debts and they are increasing their security - I'm not saying I agree with it, but it's understandable. The banks were getting wellied for a long time.

"Now, however, if property is involved in a business, a bank will probably take the mortgage as standard security. They'll also become involved in debt collection, vehicle leasing and stock. They are quickly and inevitably tightening their belt, and the result is that more companies will be forced out of business."

Asked to quantify the impact of the global credit crunch on Scottish business insolvencies, Hunter said: "I expect to see something in the order of a 20% increase in corporate insolvencies this year."

One might imagine corporate recovery and insolvency operations such as Campbell Dallas would react with glee at the predicted increase in business collapses - but not so.

Hunter added: "While the number of insolvencies will rise, there is less of a job for us to do.

"Our duty as insolvency practitioners is to the creditors - but by the time a business failure comes to us, the banks have left a very small rump to pick over. In recent years, the quality and size of that rump has been rapidly decreasing."

Meanwhile, Hunter warned that the number of personal insolvencies will also likely rise over the next year.

"We expect to see a substantial increase in this area," he said.

"And the reasons behind it are obvious. The banks and credit card companies pushed their credit on people who could not afford to take it."