Scottish business distress rises ahead of UK average in final quarter of 2015

Significant year-on-year rises in levels of ‘critical’ Scottish business distress were seen in the last quarter of 2015, according to data released today by business rescue and recovery specialist Begbies Traynor.

The quarterly ‘Red Flag Alert’ data shows an 11 per cent year-on-year rise in the most serious indicators of business distress in the last three months, when compared with the same period a year earlier.

These ‘critical’ instances (including decrees totalling over £5,000 or winding-up petitions), which often indicate impending business failure, rose from 106 to 118, the second largest rise of any part of the UK, and countering the UK average fall of 4 per cent.

An 84 per cent hike in critical distress instances was seen compared to the previous quarter (July - September 2015), and although this figure was well above the UK average, seasonal variances often result in larger sways between consecutive quarters that can vary region to region. The sectors hit hardest by critical distress in Scotland were bars and restaurants, hotels and accommodation, professional services and retailing.

The levels of less serious ‘significant’ business distress, the signals that indicate the early signs of financial problems, also rose by 17 per cent year on year in Scotland during October, November and December, when compared with the same period in 2014, exactly matching the UK average increase. Overall, Scotland’s firms showed a total of 14,060 instances of ‘significant’ financial distress during the last three months of 2015, compared to 11,989 in the same period a year earlier.

“Obviously we prefer to see falls in instances of distress when looking at the health of the economy, and rises against the trends of the UK average are just about the last thing we want to see here,” said Ken Pattullo, group managing partner in Scotland for Begbies Traynor.

“The retail sector can be a good barometer of issues that impact the wider economy and it always suffers when spending power reduces. However it is unusual to see numbers of retailers fall so badly in what is traditionally their best season, and this causes some ongoing concern about the prospects for the sector in 2016.” he added.

“The continued pressure on the oil and gas industry and the supply chain has obviously had significant impact during 2015, and that dynamic continues. The utilities sector saw the highest rise in significant distress year on year, showing that this sector hasn’t seen the last of the potential failures and distress.

“Overall it is fair to say that the distress here was pretty well shared across the whole range of Scottish businesses, with few sectors escaping the pressure at the moment, and the overall trends both here and across the UK are concerning heading into 2016,” said Mr Pattullo.