Insolvency specialist Begbies Traynor has warned that more than 300 retailers could go out of business in the New Year and that the fourth quarter of 2008 is likely to be the worst in recent memory.

The Manchester based firm has placed 323 UK retailers on its critical watch list, meaning they have at least a 70% chance of failing.

"The retail sector faces shaky times in the lead up to Christmas and early in the New Year," said Nick Hood, a partner at the firm.

"As the credit crunch sinks its fangs into the consumer and the man on the high street is hit by the fallout from Wall Street, the historically profitable and strategically vital fourth quarter looks like being the bleakest of recent years."

He believes the winners are likely to be those who have diversified, have a strong online business, and whose products resonate in the current market climate.

"For instance, Tesco's recent strong results are the fruit of their long-term insistence that 'every little helps', which strikes a chord in lean times," Hood points out.

"M&S on the other hand has spent millions on marketing 'not just goods, but M&S goods', but this implied luxury may now be in short demand."

The next three months, however, are likely to see banks support retailers who will be at their borrowing peak after stocking up for Christmas and paying all their suppliers.

But once this stock has been turned into cash and firms reduce the amount owed to the banks, there is likely to be a rash of retail failures at the start of 2009.

Hood also notes that: "The safety net of big bidders has disappeared as credit lines have dried up and companies prioritise keeping cash on their balance sheets.

"For many, January 'Sale' signs may be replaced with 'Closed for business'."