Scottish business insolvencies rise 3%

25th April 2024

Latest figures from Accountant in Bankruptcy found that there were 1,168 Scottish business insolvencies in the year 2023-2024.

The figures showed that this was an increase of 3% from 2022-2023’s figure of 1,132, an increase of 37% on 2021-2022’s figure of 854, and an increase of 23% compared to pre-pandemic levels in 2019-2020 (948).

Fourth quarterly figures indicated that in the same quarter in 2022-23, with 301 companies becoming insolvent, 13% less than in quarter four of 2022-23 when 346 companies became insolvent.

Commenting on the annual Scottish Insolvency Statistics 2023-24, Richard Bathgate, Chair of insolvency and restructuring trade body R3 in Scotland and Restructuring Partner at Johnston Carmichael, said “Even though the figures published today represent a modest increase on last year, corporate insolvency in Scotland is at its highest level since the 2011-12 financial year [1,369] as the economic climate continues to affect the nation’s businesses.

“Compulsory liquidations have increased by more than 31% compared to last year as creditors chase down debt in an attempt to balance their own books, although it should be noted numbers for this process are still below pre-pandemic levels. Creditors’ Voluntary Liquidation levels have fallen slightly compared to last year, but 2023’s total is still more than double 2019’s as a large number of directors are winding up their businesses amidst a harsh trading climate.

“The biggest issues businesses in Scotland have faced over the last year are volatility in consumer confidence and the high costs of rent, energy and raw materials. All of these have contributed to a difficult year for firms, and forced their directors to balance rising operational costs with the demands of a workforce seeking higher salaries.

“Last April’s hike in Corporation Tax to 25% also added further strain on the finances of Scottish businesses. Directors are already having to keep a close eye on their profit margins, and this additional cost, along with further cost increases from all other angles, has only made it more challenging to keep cash flow steady.

“Looking ahead, while there’s some optimism for a gradual economic recovery in 2024, this may come too late for some businesses. It’s clear that many directors are still having to make tough decisions about their long-term future, and it may be some time before we see insolvency numbers fully stabilise.

“Given the economy’s ongoing uncertainty, Scottish businesses will need to remain alert and adaptable over the coming months if they are to keep up with market conditions that appear to be changing almost every day, and Scotland’s business owners and directors will need to be alert to the signs of financial distress and act as soon as they show themselves.”