Credit, Collections & Insolvency News
Latest figures from Accountant in Bankruptcy (AiB) have revealed that business insolvencies in Scotland rose by 7.3% compared with Quarter 3 (Q3) 2022-2023, to a total of 292.
Business insolvencies (liquidations and receiverships) in Scotland for Q3 2023-2024 increased by 3.2% compared with the previous quarter’s total of 283 (July-September 2023).
Richard Bathgate, Scotland Chair of R3, the UK’s insolvency and restructuring trade body, said “The figures published today reflect a challenging year for businesses in Scotland, with corporate insolvency levels rising again in Q3 after a slight fall in numbers in Q2.
“The quarterly increase in corporate insolvencies has been driven by a rise in both Compulsory Liquidations and Creditors’ Voluntary Liquidations, while the year-on-year rise has been driven by a 26.4% increase in Compulsory Liquidations. This suggests that creditors are now actively seeking to collect debts owed to them, possibly as a response to their own financial difficulties.
“Over the past four years, Scottish firms have grappled with new hurdles round every corner, from high inflation, to soaring energy bills, rising wage demands and low consumer confidence. These issues have pushed corporate insolvencies to well above pre-pandemic levels.
“In November 2023, the traditionally successful Black Friday sales failed to provide the pre-Christmas boost many businesses were hoping for, with retail sales seeing a 1.2% decline when adjusted for inflation. And lacklustre spending continued into the Christmas period, with the cost-of-living crisis giving consumers no choice but to tighten their belts on gifts, food and celebrations.
“Legacy impacts of the pandemic have continued to weigh heavily on sectors that rely on discretionary spending like retail, hospitality, and tourism. The next few months will be key to understanding whether businesses in these sectors have brought in enough income over the festive period to stay afloat, or whether insolvencies will continue to rise into the year.”
David Alexander, Head of Debt Recovery at Gilson Gray, said “The rise in corporate insolvencies in Scotland was expected – particularly after recent high-profile cases of businesses in financial distress and entering administration.
“The rise in compulsory liquidations shows that many businesses are struggling, and creditors are becoming more aggressive with cash collection to recover what they are owed.
“This invariably has a knock-on effect further down the supply chain, with the liquidation of subcontractors and then the sequestration of directors who have issued personal guarantees.
“Throw into the mix the high cost of living, high interest rates, weak retail sales, and the surprise rise in inflation, and the stats do not paint a positive picture for the start of 2024.
“Directors should be as proactive as they can with their finances, recovering outstanding debts wherever feasible. Professional advisers, engaged as early as possible in the process, can also support you with any immediate credit issues and help direct your business towards a surer footing in the long term.”