The latest Red Flag Alert data from insolvency specialist Begbies Traynor, which monitors the UK’s financial health, shows that in Scotland in Q4 2019, there was a 28% fall in ‘critical’ or advanced financial distress (which refers to businesses that have had winding-up petitions or decrees totalling more than £5,000 against them).

Some of the sectors which showed the greatest improvement year on year were hotels and accommodation (80% decrease in ‘critical’ distress); bars and restaurants (67% fall); real estate (71% drop); and construction (-43%).

Looking across the UK, Scotland saw one of the greatest quarter on quarter falls in ‘critical’ distress in the last three months of 2019 with a decrease of 41%, significantly lower than the UK-wide drop of 13% and second only to Northern Ireland.

However, some sectors in Scotland did see a rise in ‘critical’ distress in the last quarter of 2019 compared with Q4 2018 including manufacturing; financial services, food and beverage, leisure and cultural, sports and health clubs, and wholesale.

Levels of businesses in Scotland experiencing ‘significant’ distress (i.e. businesses with minor decrees against them and those showing a marked deterioration in key financial ratios) also appear to be stabilising with 25,473 instances of this type of early distress in Q4 2019.

In the last quarter of 2019, there was no change in instances of ‘significant’ distress in the country since the same period the previous year; and a rise of just 1% since the previous quarter. Across the UK as whole, ‘significant’ distress grew by 1% quarter on quarter and by 3% year on year.

Ken Pattullo, who leads Begbies Traynor in Scotland, said: “During much of the last year, Scotland has generally fared worse than other parts of the UK, often seeing a double figure rise in advanced distress compared with the same period the previous year. It is reassuring to see the country now doing better than the rest of the UK and starting to recover from the uncertainty and disruption of the last three years.

“It is particularly pleasing to see the resurgence of construction, often the bellwether of the economy, with government figures showing that UK-wide output increased by almost 2% month on month in November 2019. However, ONS figures show that manufacturing across the UK is continuing to struggle with output falling by 1.7% on the month.

“Hopefully, with the general election behind us, businesses can start to plan for their post-Brexit future although they still await clarity on many aspects of the deal. Businesses would be wise to proceed with caution as there may still be stormy times ahead.”