Number of failing Scottish firms on the rise as individual insolvencies fall

The number of Scots going bust in the first quarter of 2015 fell by 2.4 per cent compared with the last quarter of 2014 and by 15.2 per cent year-on-year, according to latest figures.

Analysis of new Accountant in Bankruptcy (AiB) data by accountants BDO showed personal insolvencies north of the border fell from 2,633 in Q4 2014 to 2,569 in the first three months of the year, However, the number of bankruptcies rose by 10.0 per cent from 1,577 to 1,735 over the same period.

This was despite Low income low asset (LILA) sequestrations being at their lowest figure ever of 530 since they were introduced in 2008.

Bryan Jackson, business restructuring partner with BDO, explained: “It seems clear that personal insolvencies will remain higher than 10,000 per annum for the foreseeable future.

“This figure, although a welcome reduction from the 2009 peak when 23,541 Scots went bust, is still a relatively high figure historically and is an indication of just how much debt has crept into Scottish life over the last decade or so.”

Protected trust deeds fell 21.0 per cent to 834 from 1,056 which is the lowest figure since 2001, although this may be accounted for by the introduction of several other means of entering the insolvency process.

Mr Jackosn added: “Although the Q1 2015 figures have gone down there is now a base level of individuals going bust in Scotland which, I believe, will remain in the coming years. Rising house prices, continued benign interest rates, and improving optimism seem to make many people unconcerned about what might happen if any of these circumstances were to change.”

Meanwhile, the number of Scottish firms failing in the first quarter of 2015 rose by 2.1 per cent.

The AiB figures showed that 197 Scottish companies went bust in the first three months of 2015 compared with 193 in the last quarter of 2014.

Addressing those figures, Mr Jackson said: “The rise in the number of corporate insolvencies in the first quarter of 2015 is unwelcome, but not unexpected, news. It should also be noted that many of these firms, although registering as a corporate failure, may be relatively small or even shell companies simply being closed down after a period of inactivity.”

“We have already seen the impact that the falling oil price has had on support services and businesses in the North East of Scotland and this is likely to continue as the sector tries to manage its finances in a period of considerably lower revenues. The impact of this will also be felt by many of the other businesses, such as hospitality and business support services, which rely on the high income of the oil industry for their business.

“But in general business owners need to prepare themselves for the coming year by ensuring that, as the economy improves, they have managed their finances appropriately to avoid accumulating unnecessary debt to ensure that they can cope with any unexpected issues which may arise. Business owners should look at all aspects of their business finances if they are to ensure they can escape the possibility of insolvency in 2015.”