Large corporates demonstrate resilience as administrations continue to fall

The number of large businesses failing in Scotland fell by almost a third (29 per cent) in the last quarter (July-September) compared to same period in 2017 (17 down from 24).

New statistics from professional services firm KPMG also reveals total administrations in 2018 have fallen by 38 per cent compared to the same nine-month period in 2017 (42 down from 68).

The figures reflect a positive environment for Scotland’s larger corporates, which, in spite of some recent high-profile failures, are demonstrating growth and resilience in the face of uncertainty.

Liquidations, which affect smaller businesses, increased by 16 per cent compared to the third quarter in 2017 (225 up from 193), and as a result, the total number of corporate insolvency appointments recorded rose by 11 per cent (242 up from 217). Over a nine-month period liquidations rose by 32 per cent (679 up from 513).

Blair Nimmo, head of restructuring for KPMG in the UK, said: “Business confidence in Scotland is among the highest in the UK, with large businesses in particular, demonstrating resilience in the face of stalling Brexit negotiations and wider political uncertainty.

“UK headlines have been dominated by challenges in the retail and casual dining sectors, but there are positive signs of growth in Scotland in sectors such as tourism and financial services. Demand for building services also remains strong, thanks to ambitious housing targets, leading to steady growth in the sector. Additionally, stability is also returning to the oil and gas sector, albeit slowly, with the oil price for Brent Crude recently reaching a four-year high of $80.

“Indeed, there have been no recent high-profile business failures in Scotland, and at only 57 administration appointments over the last twelve months, numbers are the lowest they have been since our records begun in 2006, prior to the last recession.

“Nevertheless, liquidations have increased compared to the same period last year. This mirrors much of our experience over the past 12 months, where we have worked far more with smaller businesses, trying to assist them avoid failure. In general terms, these businesses are perhaps a little more susceptible to problems due to a lack of balance sheet strength and liquidity, meaning problems can occur relatively quickly – especially if business planning and management information are also weak. However, with the right care and attention the vast majority will survive and prosper.

“Local challenges will also have made their mark. The Sauchiehall Street fires in Glasgow, for example, will have had a negative impact on smaller traders, causing some to close their doors. However, local factors aside, Scottish business as a whole remains stable, with marginal growth experienced in some sectors.

“Looking ahead, there is increased nervousness surrounding Brexit, and there’s still a lot of guessing as to how it will impact the economy, and when.”