R3: Scottish insolvencies down, but still higher than pre-pandemic levels
![R3: Scottish insolvencies down, but still higher than pre-pandemic levels](https://www.scottishfinancialnews.com/uploads/RBathgate%2012%2009%202016%20%281%29.jpg)
Richard Bathgate
Scotland’s corporate insolvencies dipped by 3.1% in Q1 2024-2025 compared to the previous fiscal year, totalling 283.
Despite this decrease, figures are still 17.9% higher than pre-pandemic levels.
Richard Bathgate, Scotland chair of insolvency and restructuring trade body R3, said: “The main driver of the quarterly fall in corporate insolvencies in Scotland is a drop in compulsory liquidations, while the annual fall in numbers is due to a slight drop in Creditors’ Voluntary Liquidations (CVLs), which offsets the very slight increase we’ve seen in compulsory liquidations since this time last year.
“However, when you look at the corporate insolvency numbers for this quarter compared to Q1 2019, the picture is very different: Creditors’ Voluntary Liquidation numbers have more than doubled, while compulsory liquidation numbers have fallen by nearly a third.
“This suggests that creditors have been less aggressive about taking action to recover their debts than they were in 2019, but also that more directors are closing the doors of their businesses than they were then, and this is a reflection of the turbulent business climate firms have experienced since the pandemic and the range of economic issues that occurred during and after it, all of which have had an effect on businesses.”
Mr Bathgate added: “As CVL numbers have remained reasonably consistent over the last two quarters, it seems the economic growth we’ve seen since the start of this year has come too late for some Scottish businesses and hasn’t led to the upturn in revenue they needed to remain solvent.
“Despite the economic improvements and business confidence holding strong throughout the last quarter, the picture is still a challenging one for businesses in Scotland. The UK general election introduced an element of uncertainty for businesses which has impacted the positive mood among businesses, and a further uptick in confidence will rely heavily on summer spending and activity, particularly during big events such as the Euros, the Edinburgh Fringe Festival, and the Highland Games, which are crucial for sectors like hospitality, retail and tourism.”
He added: “With the passing of the Circular Economy Bill, many directors will also be rethinking how their businesses operate this year.
“Food and hospitality services in particular will need to consider the impact of charges on single-use items like disposable cups and food containers, whether this will mean increasing prices or investing in reusable alternatives. These changes will need careful planning to manage costs effectively.
“Manufacturers and retailers will also need to adapt to new restrictions on unsold goods, potentially reducing their stock levels or exploring secondary markets. While these changes may present challenges, especially for businesses already facing financial difficulties, seeking professional advice early can help navigate the new regulations.”
Turning to personal insolvencies, Mr Bathgate, who is also restructuring partner at Johnston Carmichael, explained: “The slight yearly fall has been driven by a reduction in Protected Trust Deeds. While personal insolvencies have decreased compared to pre-pandemic levels, it’s important to be cautious of these statistics, as this reduction may be partly due to a backlog, where the number of people seeking debt advice exceeds the capacity of available support.
“Meanwhile, bankruptcy numbers have reached their highest level since Q2 2020. This suggests that more people in Scotland are grappling with substantial levels of debt, and the combination of these debts and rising living costs has left them with little time to reach an agreement with their creditors.
“Despite a drop in inflation rates, costs continue to rise, albeit at a slower pace, which is keeping household budgets under pressure. The focus for many families across Scotland remains on paying for the essentials like rent, mortgage payments, and bills, and continuing to cut back discretionary spending on things like eating out and buying new clothes.
“The lifting of the 3% rent cap at the beginning of this quarter has also resulted in significant increases in rental costs across Scotland, especially in major cities such as Edinburgh and Glasgow. While the immediate impact on renters is clear, it will take some time before we can understand how this change will affect the number of people seeking personal insolvency advice.”