A series of business failures in Northern Ireland over the past three weeks has raised fears that 1998 could see a sharp increase in bankruptcies, reversing the trend of the past decade.

Coopers and Lybrand, the accountants, warn in a report to be published this week that the situation could worsen if sterling strengthened further and the UK government pursued plans to cut public expenditure for the region, already set for a 2 per cent real fall over the next three years.

The Coopers business confidence report, which surveys 600 companies, will show that while volume exports have increased, profitability at Northern Ireland companies is falling. Particularly at risk from the rise in sterling are those companies dependent on exports.

In addition, the increase in interest rates since Labour came to power has hit a number of companies, already heavily dependent on bank debt to support their operations. Local businessmen say the banks have also become less willing to extend credit.

Since mid December two bakeries, an engineering firm, two clothing manufacturers and a plastics company have either been put into receivership or have gone into liquidation.

Last weekend, O'Hara's, a Belfast bakery founded in 1905, announced that it was closing. Last month, Kennedy's, another Belfast baker, closed with the loss of 90 jobs.

Last Thursday there was a creditors' meeting to appoint a liquidator to Greenbank Plastics, a Newry company making accessories for the motor industry. The company said it had considered a restructuring, but "the situation has deteriorated significantly and we had no alternative but to cease trading".