Ken Pattullo

The figures, which are in line with the UK as a whole, are included in the company’s latest Red Flag Alert, which shows that over 2,240 businesses are now facing severe distress, up by 9.1% on the same quarter in 2022.

Ken Pattullo, managing partner for Begbies Traynor in Scotland, said: “It is concerning to see early and advanced distress in Scotland and, indeed, across the whole of the UK, continuing to climb. With no respite from high interest rates and rising costs, both businesses and consumers are struggling.

“Given the UK’s performance in recent years and with further ‘stagflation’ predicted, a technical recession remains a distinct possibility in the second half of 2024. This, together with a climate of global geo-political uncertainty, makes it more important than ever that businesses proceed with caution and seek advice from insolvency professionals at the first signs of trouble.”

The sectors which were particularly badly hit in Scotland were printing and packaging (+150%); hotels (+111%); professional services (+49%); food and drink (+40%); leisure and cultural activities (+35%); and construction (+31%).

Only two sectors in Scotland saw critical distress fall since the previous quarter: travel and tourism by 23%, and utilities by 21%.

Levels of advanced “significant” distress also rose in Scotland, by 14.2% quarter-on-quarter and 5.9% year-on-year. More than 26,000 Scottish businesses suffered from significant distress in the fourth quarter of 2023.

Julie Palmer, partner at Begbies Traynor, said: “Now that the era of cheap money is firmly a thing of the past, hundreds of thousands of businesses in the UK, who loaded up on affordable debt during those halcyon days, are now coming to terms with the added burden this will have on their finances.

“For some, a better-than-expected Christmas may kick these concerns down the road for a little longer, but the rapid growth in the levels of critical financial distress point to an economy that is waking up to the danger of debt-laden businesses in a higher rates environment.

“Sadly, for tens of thousands of British businesses who should be looking ahead to 2024 with some degree of optimism, the new year will bring a fight for survival.”