Nearly 30,000 people are predicted to become insolvent in the first three months of 2007, accountants Grant Thornton have announced.

Grant Thornton said that a third of these would be as a result of excessive Christmas spending.

The predictions follow record numbers of personal insolvencies in 2006, which will exceed 100,000 for the first time ever.

Mike Gerrard, Head of Grant Thornton's personal insolvency practice said: "Last year, during the period straight after Christmas, when most bills started to hit the doormat, we witnessed the highest ever amount of people going into personal insolvency. This year, things could be even worse. Since last Christmas, several developments such as interest rate rises, sky high utility bills and increases in unemployment, have contributed to pushing more people into financial trouble."

Interest rates increased by a quarter of a point in both August and November, while in December, the Bank of England reported that 7.7% of home owners with a mortgage had reported problems in meeting their repayment commitments - the fourth successive year on year rise.

Grant Thornton said that increases in utility costs had also played a "major part" in pushing inflation to its highest level in nine years, reducing consumer-spending power.

The number of people unemployed also increased by 197,000 to reach 1.7 million.

Mr Gerrard said: "While the figures may suggest bet-tightening exercises up and down the country, people are still spending, in fact, during 2006, Britons borrowed almost £14 billion in unsecured lending alone. Despite complaints of warm weather putting off shoppers, retail spend in 2006 was still higher than in 2005.

"Many people also funded their Christmas shopping sprees on their credit cards this year. A little overspend will not break the bank for most, but for those who are already financially overstretched, spending that little bit more during the festivities can represent the last straw that breaks the camel's back, plunging individuals in already precarious financial positions further into debt and quite possibly towards bankruptcy.

"I expect that personal insolvency levels will continue to edge forwards this year. While they may eventually settle down before next Christmas, they will do so at an already high level. At present, there are simply not the conditions in place to expect a sudden drop."

(KMcA)