‘Critical’ business distress halves in Scotland despite rise in less serious problems

The data shows a small rise of 4 per cent in the most common medium term indicators of ‘significant’ business distress in Scotland during the last three months compared with the same period in 2014, but the more serious ‘critical’ instances halved from 129 in the third quarter of 2104, to just 64 during July, August and September of this year.

This 50 per cent fall is almost double the UK average fall of 23 per cent in ‘critical’ distress levels across all business types. Only Northern Ireland saw a faster reduction in ‘critical’ distress (60 per cent) during the same period.

Scotland’s firms showed a total of 12,732 instances of ‘significant’ financial distress, the signals that indicate the early signs of financial problems, during the last three months, 7 per cent less than the previous quarter, although this fall is attributed mainly to seasonal factors in many sectors.

The latest data also showed that the level of more serious ‘critical’ distress instances (these include decrees totalling over £5,000 or winding-up petitions), actually increased by 8 per cent since the last reported quarter (April – June 2015) despite the 50 per cent fall on the previous year according to the latest Begbies Traynor Red Flag Alert research.

“A fall is always welcome, and especially in the critical instances of distress that illustrate the businesses that are closest to outright failure. That said, the good news is tempered somewhat by a rise in significant distress that tends to show a longer term picture of the wider economy.

“The UK as a whole saw a rise of just 1% on average, so Scotland’s 4 per cent increase is also larger than most English regions, which is a worry and suggests that the ripples from the oil and gas sector turmoil of late are still causing issues across the economy, even after the more immediate larger failures are behind us,” said Ken Pattullo, group managing partner in Scotland for Begbies Traynor.

“It was welcome to see so many sectors showing improvement in critical instances, with food and beverage manufacturing, retail and professional services all showing reductions of over 30% where they have seen big hikes in previous quarters.” he added.