Luella Bartley, the young British designer whose quirky yet feminine designs have adorned Kate Moss and Lily Allen, has become the latest fashion casualty of the recession.

Her company, which was founded as a drunken dare a decade ago, has been forced out of business, it was announced yesterday — despite the continued adulation of the fashion press and her celebrity fans.

Luella Bartley Limited said that it was ceasing trading after its main investor and global licensee, Club 21, had withdrawn financial backing.

The company had also been hit by the collapse last month of Carla Carini, an Italian manufacturer on whom she depended to make her products.

This failure meant that Bartley was unable to deliver orders for her spring/summer 2010 collection — which was shown at London Fashion Week this September to a front row including Alexa Chung, Pixie Geldof and Anna Wintour, whose American Vogue once described the designer as “a poster child for London cool”.

Luella Bartley, who was named last year British Designer of the Year, is perhaps the biggest fashion name to fall victim to the recession since Christian Lacroix went into administration in May.

Last month the Italian house Versace cut 350 jobs as it struggled with increasing losses, and the global downturn has also forced Burberry and Chanel to make savings this year.

Despite Luella Bartley’s plaudits from the fashion press, the celebrity fans, and a hugely successful collaboration with the American high street chain Target four years ago, the company recorded debts of £306,000 at the end of the last financial year. Its turnover was about £9 million.

In a statement yesterday Bartley, 36, called the closure “a very disappointing situation for everyone involved”, adding, “it is upsetting not to be able to protect jobs in this difficult economic climate”.

In Britain her designs were sold from her Mayfair store as well as Harvey Nichols, Urban Outfitters and the online retailer Net-a-Porter.

Bartley, a friend of the equally lauded young British designer Giles Deacon and the stylist Katie Grand, was a journalist at British Vogue when she started her company 11 years ago. She once recalled: “I think we just got a bit drunk one night and my friends were like, ‘Just do it! Just make your own fashion label!’. And I was like, ‘All right then. Yeah!’.” She has described the style as “mashed-up Sunday best”.

Bartley’s first collection had a mixed reception. But within three years, Moss was modelling her collections and the American market took notice. Club 21, which also distributes Giorgio Armani and Emporio Armani, took Bartley under its wing in 2002. After seven years of showing at New York Fashion Week, Bartley returned to London last year, to be named Designer of the Year at the British Fashion Awards.

Bartley said in her statement yesterday: “The Luella girl can have an exciting future, whichever incarnation she takes on next. We have a number of options open to us.”

Times recommends

• McDonald’s: the world’s local restaurant
• Help me to be a mum: a foyer to fulfilment
• A life online: God likes a laugh