There is likely to be a dramatic spike in company failures this Christmas, the UK chief executive of the world's largest credit insurer has warned.

Speaking exclusively to The Grocer, Fabrice Desnos UK chief executive of Euler Hermes, and the top money man on The Grocer's Power List said that despite the imminent economic recovery in the UK there would be more insolvencies in 2010 than 2009.

"While we expect the economic situation to start normalising towards the end of this year, that does not mean there aren't risks out there," said Desnos. "Companies in trouble manage to hold on for a certain period of time, which creates a lag between recession and insolvencies.

"Also, when the economy starts to recover, this puts more pressure on cashflow as output increases. Whether the banks will be prepared to extend lending to accommodate this in these circumstances remains uncertain."

Christmas would be a particularly challenging time, he said, as delivering large orders and paying suppliers for bumper stocks with a wait of up to four months for payment would put pressure on the working capital of many businesses. January and February are traditionally the peak months for company insolvencies.

Desnos was keen to reassure clients this risk had been factored in to the company's level of cover offered and would not herald new limit reductions.

Credit insurers have come under heavy fire from many figures in the industry in the past year for reducing or withdrawing cover on many companies, including giants such as Premier Foods and Bakkavör.

"Though this will be a difficult Christmas, I think we have done enough in the past 12 months to effectively reassess our risks," he said. "There is going to be a point, not very far away, where it will start to return to business as usual."

Accountancy firm BDO Stoy Hayward this week forecast 2,460 manufacturing insolvencies for 2009, up from 1,600 in 2008.