Bosses at Herald Inns and Bars have announced it has shut its flagship Mood bar on Friargate in the city centre – making it the latest casualty in the demise of drinking holes in the city.

The closure comes hot on the heels of bars Bar Censsa and Mercury Flux, which both shut down in the last month, and a string of pubs which are closing at a rate of one a month.

Now, beer bosses fear that more high street bars will follow local boozers out of business.

Lee Le Clerq, of the British Beer and Pub Association (BBPA), said that lack of cash in people's pockets due to the credit crunch and the fall-out of the smoking ban was putting the squeeze on even major chain pubs.

He said: "It is really sorting the men from the boys and the outcome will be a reduction in the number of bars we see on our high streets.

"Between about 1995 and 2004 we saw a massive boom in the number of bars coming on the market and now that golden age is over we are starting to see a reversal.

"It is a number of factors not just the credit crunch and the smoking ban but also the impact of cheap beer being available in supermarkets."

Julian Sargeson, managing director of Chorley-based Herald Inns and Bars firm, said the bar was one of a number the chain had shut in recent months.

He said: "It is cheaper sometimes to close them than keep sites open and some landlords are reasonable and some are not."

Preston's Licensed Victuallers Association chairman Ronnie Fitzpatrick, who runs the Dog and Partridge on Friargate, said it was "frightening" that three bars had closed within 100 yards of his pub.

He said: "Despite having all the money spent on them they are suddenly finding they are not worth anything.

"The mistake people have made is relying on students when they are only here 32 weeks of the year."