Scottish business in markedly stronger position than in 2016 as insolvencies fall - KPMG

The number of businesses failing in Scotland fell significantly in the second quarter of 2017 compared to the same three months in 2016, according to new statistics from KPMG.

Figures for the three months to 30 June 2017 reveal the total number of insolvency appointments decreased by 27 per cent (196 down from 270) compared to the same period in 2016.

There was a 31 per cent decrease in liquidation appointments (170 down from 246), which tend to affect smaller businesses, but an 8 per cent increase in administration appointments (26 up from 24), which usually involve larger businesses.

A comparison between the 12 months to June 2017 and the same period to June 2016 shows a 7 per cent fall in the number of insolvency appointments (867 down from 935). There was also a 7 per cent decrease in liquidation appointments (772 down from 834), which tend to affect smaller businesses, and a 6 per cent fall in administration appointments (95 down from 101), which usually involve larger businesses.

Blair Nimmo, head of restructuring for KPMG in the UK, said: “Marking an encouraging sign for business in Scotland, there has been a significant fall in corporate insolvencies during the last quarter, and in the last year.

“The statistics reflect our experience on the ground. Oil and gas has come through a very difficult period and in order to survive many businesses in the sector have drastically changed their operating models and cut costs significantly. This has put them in a stronger position and, along with the support of their stakeholders, they continue to navigate through what is still a challenging period.

“As a result, we are seeing few insolvencies in this sector, with most of our work revolving around improving approaches to working capital management. Otherwise, it is difficult to detect any sectoral pattern in Scotland and, overall, we sense a very cautious approach from most corporates, given the current political and economic climate.

“Looking to the future, clouds remain on the horizon. The likely impact of Brexit is yet to be seen and the recent election has undoubtedly introduced greater uncertainty and may have had a negative effect on consumer and corporate confidence. Inflation is on the increase and interest rates may be about to rise, while adverse exchange rate movements could also be starting to impact on some sectors, with businesses expressing concern over their ability to pass on additional costs to their customers.

“This sentiment is reflected in our most recent CEO survey which revealed the majority of UK business leaders are subdued about growth prospects over the next three years. Half of those surveyed believed their businesses would grow by less than two per cent each year and three quarters warned increases in inflation meant they would have to pass on increased costs to their customers.

“The next 12 months and beyond will be challenging for many businesses and it will be interesting to see how Scotland fairs relative to the rest of the UK.”