Scottish business insolvencies increase by 17.9%

Latest figures from Accountant in Bankruptcy (AiB) has indicated that business insolvency numbers (liquidations and receiverships) in Scotland for the year ended 31st December 2021 were 17.9% higher than in the year ended 31st December 2020, at 704 (2021) against 597 (2020).

Whilst the number of business insolvencies (liquidations and receiverships) in Scotland rose by 13.3% in Q3 2021/22 compared with Q2 2021/22 and by 77% compared with Q3 2020/21.

Commenting on the figures, Richard Bathgate, Chair of insolvency and restructuring trade body R3 in Scotland and Restructuring Partner at Johnston Carmichael, said  “The annual increase in corporate insolvencies has been driven by the rise in Creditors’ Voluntary Liquidations, which indicates that many directors are making the decision to close their businesses after struggling for more than 18 months to trade through the uncertainty of the pandemic.’

“One factor that will have played into the rise in corporate insolvencies was the ending of government COVID support measures.”

“The furlough scheme provided critical support in retaining jobs and incomes.  In January 2021 it was supporting almost 400,000 jobs in Scotland. With that coming to an end in September 2021, along with the expiry of other support measures such as certain rates relief for Scottish retail, hospitality and leisure businesses and a range of state-backed loans, any businesses that were relying on government support would have had to make tough decisions about whether their company’s future was sustainable.

“Additionally, this winter the Omicron wave led to the reintroduction of some restrictions in Scotland, which will have particularly affected the hospitality sector during what is typically a busy time of year.”

“Recent months have also seen inflation reach the highest level in over a decade. This trend is expected to continue through the next year, with the Bank of England and other forecasters predicting inflation will peak at six percent in the first half of 2022.”

“Uncertainty around the Omicron variant meant consumer spending remained relatively low this Christmas, particularly compared to last winter, and as a result many businesses missed out on the boost in income the festive period usually brings.