Brexit impact still to be felt as fewer Scottish firms found in distress

Scottish firms saw levels of ‘critical’ business distress, the most serious signs that indicate the early onset of financial problems, fall ahead of the UK average in the last three months, according to data released today by business rescue and recovery specialist Begbies Traynor.

Red Flag Alert data which is released every three months and measures the financial distress within the region’s businesses, showed that instances of critical distress levels in Scotland, which include decrees totalling over £5,000 and winding-up petitions, fell by 17 per cent quarter on quarter, and 16 per cent compared with a year ago.

This compared favourably with the UK average fall of just 2 per cent in the last three months, and 6 per cent since the same period in 2015.

Instances of ‘significant’ business distress, the most common indicators of less serious problems, have risen by 2 per cent year on year, exactly tracking the UK average, and fell by 7 per cent since the last quarter reporting in July (compared to a fall of 6 per cent across the whole UK).

In total, firms in Scotland showed 13,036 instances of significant business distress in the third quarter of the year, with 12,116 of these (93 per cent) coming from SMEs.

“There appears to have been no immediate impact from the Brexit vote in June, but whether the improvements to export exchange rates and pricing have mitigated the uncertainty and drop in confidence is still unclear,” said Ken Pattullo who leads Begbies Traynor in Scotland.

“These was no let up in the hardship endured by the engine room of the Scottish economy, the SMEs, which accounted for all but 7 per cent of the instances of significant distress, underlining the need to balance the support for small firms which provide the greatest contribution to the economy here and across the UK,” he added.

Scottish businesses that did see the largest increase in significant distress totals in the last quarter, when compared to a year ago, included: hotels and accommodation (13 per cent); media (11 per cent); transport and logistics (9 per cent).

The sector that saw the largest rise in critical distress was construction (50 per cent) whilst manufacturing and retailing sectors both saw healthy falls of 56 per cent and 43 per cent respectively.

“Quite what the immediate future holds with regards to the continuing impact of Brexit will remain an open question for some time, but the good news is that, so far, the momentum Scottish businesses have recovered since 2014 doesn’t seem to have evaporated after the Brexit leave vote,” he concluded.