Figures show drop in Scottish corporate insolvencies



Fergus Ewing
Business minister Fergus Ewing

The number of Scottish corporate insolvencies in the first quarter of the year is 21.2 per cent lower than over the same time last year, according to new Accountant in Bankruptcy (AiB) data.

The figures, included in the latest AiB quarterly report, were hailed as “a welcome sign the Scottish economy is on the road to recovery” by business minister Fergus Ewing.

The number of businesses going to the wall in the first quarter of the year remained static at 197, the same number as in the previous quarter, but the total is 21.2 per cent lower than in the same quarter in 2014-15, which saw 250 corporate insolvencies.

However, law firm HBJ Gateley has suggested “sector-specific spikes in insolvencies” are possible in the future.

BDO LLP echoed some of their concerns, welcoming the static number of insolvencies but highlighting “pockets of concern such as the oil and gas sector which is undergoing a transformation in the way it operates in Scotland”.

Yvonne Brady, head of corporate restructuring at HBJ Gateley, said: “That Scottish corporate insolvencies are down on last year by a significant margin is encouraging and these statistics confirm that, for the most part, the corporate insolvency market has finished consolidating itself. But they can also be seen as a reflection of the changing landscape of corporate restructuring.

“Corporate restructuring is evolving along with new ways of doing business –including increased access to and reliance on the internet; while alternative finance options are also a factor in the changing landscape of the distressed sector.

“This combination is giving businesses more flexibility and options as to how they reshape themselves, which in turn may lead to higher survival rates for companies in distress. Overall, this is positive for Scottish commerce.

“However, in future, we might see sector-specific spikes in insolvencies as different industries continue to adjust to micro-economic pressures.

“For example, with the double whammy of consumers’ post-recession cost focus and the rise of digital technologies in delivering everything from groceries to clothing, the retail sector will never be the same again.”

Bryan Jackson, business restructuring partner with BDO, said: “The uncertainty over the Eurozone and the dip in demand from China will play their part in easing the performance of the economy but there is a view that most Scots firms are prepared for such difficulties and have appropriate contingency plans in place to meet these market fluctuations.”

Mr Jackson added: “It is important, however, that companies use the upturn in the economy to rebalance their businesses and ensure that any debt is reduced and cash flow is maintained to ensure that management is ready for all eventualities.

“For companies facing financial problems they need to address these immediately rather than wait for a difficult situation to become worse.”

Tags: AIB, insolvency



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