Number of Scottish business facing critical problems falling as UK averages rise

Businesses in Scotland saw the biggest reduction in the UK of the most serious signals of business distress in the first quarter of 2017, according to new data released today by business rescue and recovery specialist Begbies Traynor.

The quarterly Red Flag Alert data shows that against a background of rising ‘critical’ business distress across the rest of the UK, up 7 per cent year on year and 17 per cent since the last quarter of 2016, Scottish firms by contrast saw significant falls.

Instances of ‘critical’ business distress, indicators of the most serious problems including decrees totalling over £5,000 and winding-up petitions, declined by 28 per cent year on year in Scotland and fell 8 per cent since the previous quarter.

The continued trend of reduced year on year critical distress in the construction sector (-71 per cent), manufacturing (-67 per cent) and bars and restaurants (-67 per cent) were the main contributors to the fall in critical business distress levels across the country.

The news wasn’t universally positive for Scotland, however, as the data also showed that instances of less serious but more common ‘significant’ distress levels in the country rose by 5 per cent quarter on quarter, and by 6 per cent compared with the same period a year earlier.

“Anytime we show positive trends and out-perform UK averages we have to welcome the news, but we are careful to make sure we put the trends into perspective, and there needs to be a balanced view here with awareness that the less serious signs of significant distress are still rising,” said Ken Pattullo, who leads Begbies Traynor in Scotland.

“The falls could also be partially attributed to the high levels of distress we saw in Aberdeenshire as the oil and gas sector has seen such hard times over recent years. It would appear that we could have seen the peak of distress in that sector, which is obviously welcome.

“Sectors with the biggest year on year rises in ‘significant’ instances of distress, the early warning signs of problems, included transportation and logistics by 46 per cent, media that saw rises of 30 per cent and wholesaling climbed by 32 per cent,” he added.

The Scottish construction sector saw no rise in distress signals year on year, and some sectors, including hotels and accommodation (-4 per cent); food and drug retailers (-3 per cent); professional services (-9 per cent) and automotive (-15 per cent), saw falls.

In total, firms in Scotland showed 48 instances of ‘critical’ business distress in the first period of 2017 (down from 67 a year earlier) and ‘significant’ instances totalled 15,086 (up from 14,266 a year before).

“Overall the supply chain in the UK is facing challenges from a weak pound and rising inflation, in particular in fuel and food costs, and there is no doubt that these ‘Brexit effects’ will keep impacting parts of the Scottish economy too ,” said Mr Pattullo.