The number of small firms going out of business in Northern Ireland has risen sharply this year, according to the latest figures from the business information company Dun and Bradstreet.

Its latest survey shows the number of businesses which went into liquidation or bankruptcy during the first quarter of 1998 was, at 110, almost one-third higher than the 79 recorded for the same period a year ago.

According to the survey, most of them are small firms. While the failure rate of large organisations changed little, that among smaller companies rose by 37 per cent.

Mr Paul Rooney, a partner in the business recovery and insolvency division of the accountancy firm Coopers & Lybrand, said the figures showed the effect of the strong British pound and lower demand in the domestic market.

"Although business failures in 1997 hit a five-year low," he said, "there was evidence before Christmas that the strength of sterling was curtailing exports, and that the strong consumer demand which had supported the economy during last year was beginning to fade."

Mr Rooney said that, although the total number of year-on-year liquidations among larger firms was unchanged, the threefold increase in service sector failures suggested that the problems in the manufacturing sector were beginning to affect firms in the service sector.

He said Northern Ireland was now facing increased global competition and depressed overseas sales due to the strength of sterling.

"Most of Northern Ireland's manufacturing and service sector investment is funded from retained earnings and borrowings," he said. "That means that as margins come under pressure, cash flow may become the single most important word this year in management vocabularies."

A survey carried out by the University of Ulster Business School has also found that small firms are likely to find the coming year an increasingly difficult one.

According to the survey, which was sponsored by Cable and Wireless, sales growth is at its lowest for four years, particularly in the manufacturing sector. Employment growth is also at its lowest since 1994, and expectations of sales, employment and investment growth are all relatively low. Around 40 per cent of firms are opposed to the introduction of a minimum wage of £4 an hour, while 20 per cent would not support a rate of even £3 an hour.

Mr John Adams, of the Ulster Business School, said the minimum wage was a serious issue for small firms and the evidence was that its introduction would be likely to result in some redundancies in the small business sector. The survey had also revealed what he said was a worrying fall in confidence.

"Given the small business sector's importance in the Northern Ireland economy," he said, "it is vital that companies receive as much support as possible. The continuing strength of sterling is a severe problem for exporters, and surprisingly in some cases, skill shortages are a recurring problem in some areas."