Aberdeenshire bearing the brunt of ‘critical’ Scottish business distress rises - Begbies Traynor

Across Scotland as a whole the quarterly ‘Red Flag Alert’ data shows an 11 per cent year-on-year rise in the most serious indicators of business distress in the last three months, when compared with the same period a year earlier. Aberdeenshire however saw a record 78 per cent rise in these instances compared to the same period a year earlier, accounting for more than half of Scotland’s total increase.

These ‘critical’ instances (including decrees totalling over £5,000 or winding-up petitions), which often indicate impending business failure, rose from 106 to 118 in Scotland and from 9 to 16 in Aberdeenshire alone, countering the UK average fall of 4 per cent.

The levels of less serious ‘significant’ business distress in Aberdeen more closely tracked UK and Scottish averages, rising 15 per cent year on year to a total of 1,454 during October, November and December. This figure accounts for 10 per cent of Scotland’s total of 14,060 instances of ‘significant’ financial distress during the last three months of 2015. These early signals, indicating future financial problems, rose on average by 17 per cent year on year in Scotland, when compared with the same period in 2014, exactly matching the UK increase.

The sectors hit hardest by both types of distress in Aberdeenshire were bars and restaurants, hotels and accommodation, professional and business support services, sectors that have all been heavily impacted by the recent job losses and failures in the oil and gas sectors.

“Aberdeenshire businesses have been in the eye of the storm for many months now, and the region continues to see failures as a knock on effect of the turmoil in global oil and gas markets. On a daily basis we see how the world economy has been impacted by the free-falling price of oil, and Aberdeen has unfortunately continued to feel the impact on a very local level,” said Ken Pattullo, group managing partner in Scotland for Begbies Traynor.

“Rises in critical distress instances, the most serious we can measure before a business collapses, ahead of the Scottish average are obvious indicators of the region’s dependence on the troubled sector. But to see a 78 per cent hike against a UK average fall of 4 per cent is alarming, and Scotland’s overall increase of 11 per cent is also a very worrying trend.

“The fact that significant distress has risen slightly slower than the Scottish average seems to indicate that the knock-on effects of Aberdeen’s recent job losses took a while to impact on the wider Scottish economy, but rises of 15 per cent are not good news by any measure.” he added.

“The continued pressure on the oil and gas industry and the supply chain will inevitably see more business failures, and we can only hope for a bottom to the free fall in crude prices that has so clearly slashed away at the region’s economy since 2014,”said Mr Pattullo.