The number of business failures in the Republic dropped significantly last year, but insolvencies became increasingly common in the construction industry.

According to the latest figures from accounting firm Farrell Grant Sparks (FGS), the total number of insolvencies recorded last year fell to 345, almost 16 per cent less than in 2005.

Declan Taite, corporate restructuring partner at FGS, said that this decrease was due to "stable economic trading conditions".

The building sector accounted for more than one third of all business collapses, with 116 construction and engineering companies placed in liquidation, receivership or examinership during the year.

This compared to 104 failures recorded in the sector in 2005.

Mr Taite said that the high failure rate of such enterprises is in stark contrast to "the general buoyancy within the sector".

He attributed the increase in failures to consolidation within the construction sector, coupled with high insurance and fuel costs.

Increased competitiveness and tight margins meant that some smaller construction operations were no longer economically viable, he added.

The hospitality sector also incurred a high level of failures and accounted for 12 per cent of all insolvencies last year.

Almost half of all business failures last year occurred in Dublin, while Leitrim and Roscommon were the only counties in which insolvencies were not recorded.