Alastair McAlinden

Data from Companies House showed 14 administrations between January and March, broadly consistent with the 12 cases in Q1 2024 and 15 in Q4 2024. UK-wide figures also held steady at around 330 cases.

The firm expects insolvencies to rise sharply as businesses grapple with the impact and uncertainty of new US tariffs on their organisations and the wider economy. They also point to a possible burst of opportunistic M&A activity for both corporates and private equity.

Commenting on the latest figures, Alistair McAlinden, managing director and head of Interpath in Scotland, said: “The latest insolvency figures have remained steady over the past year in Scotland, reflecting the prevailing benign economic conditions. But now, economic protectionism means that the storm clouds are gathering.

“The universal tariff imposed, and now paused, by the US has sent shockwaves round the globe and has knocked corporate confidence. Quite simply, businesses are unnerved. We’ve already seen that come through in volatility in the markets nationally and internationally. Together, this may mean that we see expansion plans put on ice and a reduction in capex and technology investment.

“Management teams are concerned by the effect these changes will have on their own trading and margins, but also the stability of supply chains and medium-to-longer term health and demand within the UK and Scottish economy. All this puts real emphasis on the basics of cash management, performance improvement and lender engagement to build resilience.

“Unless the UK can ratify a bespoke deal quickly, we should expect a notable rise in administration levels in sectors such as industrial manufacturing and automotive through the summer ahead, with the indirect effects of the tariff hike to hit services further down the line. The timing couldn’t be tougher as so many businesses should be ramping up investment right now as we pass through a period of fundamental structural change in the economy which has been upended by the rapid emergence of AI.”

When it comes to sectors, the latest data shows that building & construction remains the largest single sector in Scotland for cases with five administrations out of 14 over the period.

McAlinden added: “In terms of the current administration picture, Scotland administrations continue to be driven by a fragile building and construction sector.

“Nationally, the distress is more widespread, driven by challenges like rising labour costs following the latest changes to National Insurance Contributions and National Minimum Wage, soft trading, supply chain disruptions, and wafer-thin margins.”

He continued: “In any case, businesses have often been left with too little fat on the bones to be able to address issues that they would have, not long ago, confidently taken in their stride.

“We’re seeing those concerns reflected in the lender community as we work with more banks and specialist lenders to conduct comprehensive pre-lend reviews to bolster due diligence on new lends. Closer to home, we are also seeing challenges in the Scotch Whisky sector with US tariffs a real blow given importance of the US as a leading export market.”

Mr McAlinden concluded: “While there is a lot of uncertainty, such disruption does present opportunities. Corporate buyers with strong balance sheets can look to put capital to work and realise their growth ambitions.

“We’re already seeing mandates in the market locally for businesses that have suffered a quick change in fortune and could present significant opportunities to take on market share, expand into new areas, or acquire certain expertise. For private equity, we may see this pull through into portfolios as they make incisive buy and build plays to build value.”