Accountant in Bankruptcy (AiB) has released its latest official statistics reporting company insolvencies in Scotland for the first quarter (Q1) of 2018-19 and final statistics for the 2017-18 financial year. The results show that the number of corporate insolvencies in Scotland fell by 5% in Q1 2018-19 (April-June 2018) compared with Q4 2017-18 (January-March 2018), but rose by 23% compared with Q1 2017-18 (April-June 2017).
Commenting on the Scottish Insolvency Statistics, Tim Cooper of R3 in Scotland, the insolvency and restructuring trade body said “The number of corporate insolvencies has fallen slightly in April-June 2018 compared with the previous quarter, but is notably larger than in the same quarter last year. The larger number of corporate insolvencies in January-March 2018 may have been boosted by directors deciding to wind up their businesses at the end of the financial year, while the bigger picture shows that corporate insolvencies have been trending upwards since the start of 2017.’
“It’s been a tough first half for many Scottish companies, with only weak GDP growth of 0.2% in the first quarter, and a big fall of construction sector output (-3.5%). The statistics do not quite tell the whole story, however, as company voluntary arrangements and company administrations are not included.
“Every insolvency of a company will have a knock-on effect for other companies which were its suppliers, customers or creditors. Around 17% of companies in Scotland may have suffered a financial hit following the insolvency of a customer, supplier or debtor in the last six months, according to R3’s research – this is however lower than the proportion of UK companies reporting a negative effect from the insolvency of a counterparty within the previous six months, which stands at over one in four (26%).”
“The picture isn’t all rosy for Scotland, though. The troubles in the retail sector in particular have been widely reported, with consequences for companies in other sectors, from shop outfitters to recruitment agencies supplying shopfloor staff. The Scottish Government launched a review of business rates in late June; based on its findings, there may be some relief for beleaguered high street names, which can’t come soon enough.”
“Businesses as a whole are affected by a lack of consumer spending power, as inflation has eroded people’s take-home wages, leaving less for essentials and for extras. In addition, the background of rising staff costs, pensions auto-enrolment costs and the need to invest in technology and more efficient processes has not gone away.
“R3’s monthly research into levels of company distress consistently finds Scotland with the lowest proportion of companies considered at greater than normal risk of insolvency in the next twelve months of anywhere in the UK. However, the proportion of businesses falling into the negative band has risen from a fifth (22%) in July 2017 to over a third (35%) in July 2018, mirroring the trend for the UK overall (from 27% to 42% over the same period).”
“It’s really important to emphasise that a period of distress will not inevitably lead to insolvency: for directors of struggling firms, seeking external guidance from a regulated, professional expert on restructuring and turnaround can be a pivotal experience. Don’t wait until it’s too late – getting advice and taking action before your business is overtaken by events is key.”
The number of Scottish registered companies becoming insolvent or entering receivership increased in the first quarter of 2018-19, with 245 companies becoming insolvent compared with 200 in 2017-18 Q1 There were 141 members’ voluntary liquidations (solvent liquidations), down on the 151 in 2017-18 Q1.
Corporate insolvencies increased from 846 in 2016-17 to 884 in 2017-18.