Insolvencies to rise 10 percent this year

LONDON (Reuters) - Corporate insolvencies are set to continue to rise at least at an annual rate of about 10 percent amid the economic slump, a report said.

Retail and construction companies will be the most affected as consumers cut spending and as the slowdown in the mortgage market has significantly reduced house sales, said a report by accountancy firm PriceWaterhouseCoopers, published on Thursday.

Insolvencies among construction companies rose to 449 in the second quarter, up 35 percent from the same period last year, while the number of insolvent retailers increased by 28 percent, PWC said.

"It is clear that the consumer downturn is now starting to have a real effect on the construction industry, but the slowdown in the industry is not yet fully visible," said Barry Gilbertson, a partner at PWC.

"A large number of the construction insolvencies are sub-contractors to the housing industry whose pipelines of work have all but dried up following the slowdown in residential property as many projects are mothballed or stopped before they even begin."

The problems of the construction industry will worsen as new buildings fail to find tenants, the report said.

British consumers are cutting spending as the fallout from the global credit crunch spreads throughout the economy.

(Reporting by Elena Moya; Editing by Erica Billingham)