Tim Cooper

The equivalent figure for the UK overall is higher, at over two in five (41.1%), while the South East of England is the region with the highest level of companies at greater than average risk of insolvency in November, at 44.8%.

Of the sectors monitored by R3, Scotland’s construction and transport industries performed relatively well compared with other parts of the UK, coming second-lowest in the tables for elevated risk levels.

At 41% of companies deemed to be at higher than usual risk of insolvency, Scotland’s construction sector was beaten only by London (at 40.6%), with the UK average 43.7%. For transport and haulage, meanwhile, Scotland, at 33.9%, was some way behind table-topper Northern Ireland on 26.9%, but lower than the UK result of 39.5%.

The news was less positive for Scotland’s manufacturers, however, who had the third-highest level of elevated insolvency risk of anywhere in the UK, at 38.3% (UK overall: 36.5%).

Tim Cooper, chair of R3 in Scotland and a partner at Addleshaw Goddard, said: “Having one in three Scottish-registered companies at above-average risk of insolvency is a stark reminder that it’s tough out there for a number of businesses, and – although overall levels of elevated risk are lower than in other parts of the UK – Scottish enterprises need to be aware of the potential hazards out there.

“Uncertainty is depressing order books, as companies hold back spending decisions for a more settled time. Unfortunately, while this may be a rational idea on an individual basis, the overall economic effect is less helpful, as cashflows stutter due to reduced demand.

“The result of the general election, and the prompt passage of the UK Government’s EU withdrawal bill, may alleviate the effects of ‘uncertainty’ to a degree, so it will be interesting to see the impact after Q1 of 2020.

He added: “The transport and construction sectors are notoriously volatile, with low margins and fluctuating costs perennial sources of concern for many operators. It is somewhat reassuring, then, to see Scotland’s sectors performing relatively well in comparison to elsewhere in the UK – although no business can afford complacency, with one misjudged decision sometimes all it takes to tip a company into difficulties.

“The festive season provides an activity boost for some sectors, and a chance to catch their breath and take stock of the year just gone for others. Directors and business owners should keep a very close eye on cashflow, and be prepared to seek professional, reputable advice if a problem looks like it might snowball into something more serious.”

The figures are from R3’s latest insolvency risk tracker. The tracker is compiled using Bureau van Dijk’s ‘Fame’ database of UK companies and measures companies’ balance sheets, director track records and other information to work out their likelihood of survival over the next 12 months.