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The National (Scotland)
The National (Scotland)
National
Xander Elliards

Number of Scottish businesses going insolvent 'up one-fifth year-on-year'

THE number of Scottish businesses going into insolvency has jumped by a fifth year-on-year, according to analysis.

The figures reflect a sluggish economy, the cost-of-living crisis, high interest rates and ongoing geopolitical uncertainty, according to finance consultants Interpath Advisory.

The firm analysed notices in The Gazette, the UK’s official public record, and found that the Scottish data also reflects a UK-wide trend.

Interpath Advisory said they had found that a total of 11 companies based in Scotland fell into administration in the third quarter of 2023 – a 22.2% increase on the nine companies in the third quarter of 2022.

Though the numbers are small, the UK figures tell a similar story.

Across the UK as a whole, 330 companies fell into administration in the third quarter of 2023. This was a rise of 19.6% on the 276 firms to do so in the same period of 2022.

The firm said it was “further evidence that insolvency activity is now back to pre-pandemic levels following the record lows seen during 2020 and 2021”.

Alistair McAlinden, the managing director and head of Interpath Advisory in Scotland, said: “The number of insolvencies continues to creep up, but nevertheless, remains around pre-pandemic levels.

“Indeed, if we look at the pattern of activity since the start of 2023, we’ve seen a steady and incremental uplift over the course of this year, rather than the sudden deluge many expected.

“That said, in recent months there has been a noticeable shift in approach from creditors, including HMRC, lenders and landlords.

“Whilst many previously preferred forbearance and restructuring to enforcement, we are starting to see more and more action taken in the form of winding up petitions. If this continues, this has the potential to precipitate a larger volume of insolvencies as we move through the final quarter of the year.”

Interpath Advisory said that the rising number of insolvencies can be seen across a wide range of sectors, with companies operating in the retail, building and construction, professional services, and real estate industries affected.

McAlinden went on: “With the Chancellor ruling out the possibility of tax cuts this autumn, wider geopolitical events, and a 2024 General Election on the cards, the outlook for Scottish businesses remains uncertain.

“As cost of living pressures and sluggish economic growth are likely to continue, a combination of short-term cash visibility, and long-term planning will be critical for businesses and management teams across Scotland to ensure they remain resilient.”

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