Small businesses crippled by economic slowdown in the Bristol area are the worst hit in the country, a new report reveals.

Nearly two-thirds say their business costs have increased as banks call in charges and loans to small firms amid a floundering economy.

A staggering 56 per cent have lost trade as customers tighten their belts while around one in five businesses have seen their debt increase.

Research from business social networking site BT Tradespace revealed one-fifth of businesses do not know how to boost their trade.

It comes as new figures show the number of firms declared insolvent soared by 50 per cent compared to the same period a year ago.

And just last week Alistair Darling threw a £4 billion lifeline to small and medium-sized enterprises (SMEs) battling to survive to credit crunch.

Ivan Croxford, director of BT Tradespace, which quizzed 200 SMEs in the South West, said: "Running a small business has never been easy but what we have had is a good 10 years of growth."

Ray Redmore, chairman of Bristol's Federation of Small Businesses, warned: "One needs to be careful about everyone talking themselves into a crisis."