The number of companies declared insolvent in England and Wales in the first three months of 2023 was up 18% on a year earlier and remained close to the 13-year high recorded in the final quarter of 2022, government data showed on Friday.

Some 5,747 companies in England and Wales were declared insolvent in the first quarter of this year compared with 5,969 in the final quarter of 2022, which was the highest number since mid 2009, the seasonally adjusted figures showed.

"We're seeing an increasing domino effect of insolvencies where firms fail and are unable to pay their debts, thus causing the failure of other firms to whom they owe money," said David Kelly, head of insolvency at accountancy firm PwC.

Surging energy costs last year put pressure on many British smaller businesses, especially in hospitality, leisure and retail as households have less money to spend on non-essentials.

Many firms were still carrying debts built up during closures caused by lockdowns to tackle the COVID-19 pandemic.

Earlier this month, the International Monetary Fund forecast that Britain's economy would shrink 0.3% this year, the biggest fall it predicted for any major economy.

PwC said 98% of companies being liquidated had an annual turnover of less than 1 million pounds ($1.25 million).

"While the scale of these businesses is relatively small, they are an important part of the UK corporate ecosystem," Kelly said, adding that there were signs trouble was now beginning to spread to larger, more resilient firms.

Looking just at the most common type of insolvency, creditors' voluntary liquidation, the number of companies going bust over the past four quarters was the highest since the series began in 1960, the government agency that released the data said.

Compulsory liquidations, which require a court order, have almost doubled over the past year but were still slightly lower than before the start of the pandemic.

Measured as a proportion of companies actively trading, total insolvencies were the highest since 2014 at 0.508%.

Friday's data do not cover Scotland or Northern Ireland, which have separate bankruptcy processes to the rest of the United Kingdom. ($1 = 0.8029 pounds) (Reporting by David Milliken Editing by Frances Kerry)