One in five sizeable Scottish businesses suffering financial stress
One in five major businesses in Scotland are ‘financially stressed’ according to new research from KPMG.
Examining the filings of Scottish businesses with revenues in excess of £10 million, the firm identified 21% of Scottish businesses suffering financial distress, representing a 22% increase over the most recent 5 year period.
Despite the negative trend, Scotland compares favourably to the rest of the UK, where 24% of businesses are suffering financial stress and 4% of business are facing acute financial distress (3% in Scotland).
KPMG’s analysis reveals the sectors bearing the largest numbers of companies in financial stress and distress are: Business Services; Building & Construction; Consumer production; Leisure & Hospitality; and Industrial Manufacturing.
Consumer production (one in four) and Leisure & Hospitality (one in three) are the sectors with the highest proportions of stress. Both industries have witnessed a marked increase in stress since 2017.
Meanwhile, Business Services and Industrial Manufacturing are showing stress in line with the Scottish average (one in five) and are tracking largely flat against previous year’s results.
Only Building & Construction is showing a lower proportion of businesses in stress than the Scottish average (one in six) and an improvement from the previous year (with a year on year decline of 20% of businesses in stress).
Blair Nimmo, head of restructuring at KPMG in the UK, said: “The analysis reflects our historical experience of the Scottish economy namely that it doesn’t experience the same levels of volatility as in England.
“When we drill into the data, the population experiencing more acute financial distress in Scotland has remained flat across the last five years. Contrast this with the North of England and London for example where distress growth rates of more than 10% have been experienced.
“However business leaders in Scotland can’t rest on their laurels. The more disappointing results experienced elsewhere, in combination with increased signs of distress in Scotland is concerning and businesses need to be alert to take early action to rectify issues.”
Alan Flower, head of KPMG’s restructuring advisory team in Scotland, added: “No doubt Brexit uncertainty has had its impact on these results and despite recent progress on that front, until a trade deal is done, the impact assessed and then its operation experienced, uncertainty is going to be the new norm. This uncertainty will impact across sector.
“The well-publicised problems in retail and casual dining are undoubtedly at the heart of Consumer Markets and Leisure and Hospitality sectors appearing on the list of sectors whose performance has declined.
“But notwithstanding this broad analysis, well-run businesses that identify issues early and take action will always succeed despite macro-economic or sectoral issues faced.”