Election uncertainty continues to stymie Scottish economy –Begbies Traynor

Scotland’s firms showed 12,041 instances of ‘significant’ financial distress, the signals that indicate the early signs of financial trouble, between January and March 2015.

The total is almost identical to the previous quarter’s 11,989 reported instances, whereas the UK average saw a 1 per cent fall in the same period.

“The referendum put the brakes on investment in Scotland for some time, and to have a General Election so soon after that uncertainty has compounded a period of very little long term investment in the country,” said Ken Pattullo, group managing partner in Scotland for Begbies Traynor.

Different sectors of the economy again saw vastly differing fortunes, with food and drug retailing (an 86 per cent rise); food and beverage manufacturing (up 55 per cent) and wholesaling (39 per cent increase) seeing the most significant increases in distress once again.

In contrast the professional services sector (down 27 per cent); leisure and culture (down 25 per cent); and telecoms and technology firms (with a 24 per cent reduction) saw the biggest falls in distress levels.

“Retail has again seen some massive rises in the early warning signs and the steep level of increase is very concerning,” commented Pattullo.

There were slightly fewer instances of less common ‘critical’ business distress reported in Scotland (namely decrees totalling over £5,000 or winding-up petitions) down by 5 per cent in the last quarter compared to the previous three months according to the latest Begbies Traynor Red Flag Alert research. This follows a fall of 18 per cent in the previous quarter.

“Even where we saw critical distress levels fall again, the one sector that reported an increase in instances was food and drug retailing where they rose by 150 per cent, and that underlines the grave prospects for a number of firms in the retail sector,” added Mr Pattullo.

Ric Traynor, executive chairman of Begbies Traynor Group, added: “In reality the election has had a minimal impact on trading volumes so far, suggesting that many businesses may have missed out on significant growth opportunities over the first quarter by being overly cautious. But as the election draws nearer, levels of political uncertainty are finally catching up with expectations and it is now too late in the day for businesses to revert back to growth mode.

“With little separating the two main parties in the polls, the likelihood of an inconclusive result on 7 May is higher than ever. If so, this could result in the formation of a new coalition, the drafting of an emergency Budget and potentially an additional month of uncertainty, therefore restricting new investment until June or beyond and putting the economy and UK businesses at risk of slower growth.”