Scottish business insolvencies increase by 13.3%

Latest quarterly figures from Accountant in Bankruptcy (AiB) have indicated that business insolvency numbers (liquidations and receiverships) in Scotland increased by 13.3% compared with Q3 2021-2022.

The number of corporate insolvencies (liquidations and receiverships) in Scotland for Q3 2022-2023 increased by 0.7% compared with the previous quarter (July-September 2022).

Commenting on the Scottish Insolvency Statistics, Richard Bathgate, Chair of insolvency and restructuring trade body R3 in Scotland and Restructuring Partner at Johnston Carmichael, said “The quarterly and yearly rise in corporate insolvencies has largely been driven by an increase in compulsory liquidations, which have increased by 72% from the same time last year.”

“This suggests that companies across the supply chain are feeling the pinch and that creditors are now prepared to take the legal route to recover the debts they are owed, perhaps in order to pay their own bills and satisfy their own creditors.”

“There’s a feeling of real uncertainty in the Scottish business community at the moment. With talks of recession, low consumer confidence and rising costs, a lot of directors aren’t confident about their prospects for the year ahead, which is likely to be full of the same persistent challenges faced since the pandemic ended.”

“While consumer spending went up over the festive period, the boost wasn’t enough for every business, with the extra income offset by rising fuel, rent and raw material costs.”

“With Christmas now out of the way, people are really looking at how they can cut back on their spending so while all sectors are under immense strain, it’s likely we’ll see businesses in retail, hospitality and other sectors that are dependent on discretionary spending struggle this year.”

“It’s been a volatile couple of years, but we aren’t out of the woods yet. As we move into 2023, firms need to consider their situation, prepare for what’s on the horizon and act if they run into cashflow problems, issues with paying staff, rent or taxes, or see their stock start to pile up.”

Steven Jansch, Head of Insolvency at Gilson Gray, said “The number of Scottish companies entering insolvency has increased again, according to the AiB’s latest figures, and that upward trend is set to continue.”

“Overall insolvencies are up both when compared with year-on-year and pre-Covid levels. What is interesting to see, though, is that creditor pressure has yet to return to pre-pandemic levels – although year-on-year levels of compulsory liquidations have increased, this is still lower than what was typical during 2019-2020.”

“The cost-of-living crisis is yet to take its full toll on Scottish businesses, and I expect increased numbers again next quarter. While it is good to see that overall numbers of insolvencies are returning to a ‘healthy’ pre-pandemic level – meaning that some directors are properly dealing with longer term business issues – the rise in compulsory liquidations is a sign that there is more to come.”

“Good quality, regularly updated, and stress tested management information is crucial for the long-term survival of any business. Directors should proactively take advice from professional advisors to ensure that creditor pressure does not suddenly become an insurmountable burden.”