The credit crunch is hitting business in London and the South-East harder than anywhere else in Britain, sending the number of firms with "critical problems" soaring.

A staggering 1545 companies in and around the capital were put on the "critical list" by recovery specialist Begbies Traynor in the first three months of the year. That was nearly five times more than the 316 in the first quarter last year.

The list includes firms with county court judgments worth £5000 or more against them, with many also facing winding up petitions.

Begbies Traynor chairman Ric Traynor today said: "The combination of adverse economic conditions and tightening credit availability has clearly had a major impact on companies in the first quarter of 2008 and in particular London and the South-East has been hit the hardest. This trend is expected to continue.

"Clearly the credit crunch is beginning to bite and the decreasing availability of credit is being felt by the most fragile companies seeking to extend credit lines and refinance."