Business insolvencies up 14% in a year, figures show

Business insolvencies in Scotland have risen by 14% in a year, new figures indicate.

Statistics from professional services firm KPMG show insolvency appointments rose from 832 in 2017 to 945 in 2018.

A KPMG analyst said the rise is “disappointing but by no means alarming” and pointed to a fall in insolvencies in the final three months of 2018.

During this period, there was an 11% drop in businesses becoming insolvent compared to the final three months of 2017, falling from 251 to 224.

The figures show a marked difference in the rates of firms entering administration, which generally affects larger companies, and those going into liquidation, which tend to be smaller businesses.

Administrations fell by just under a quarter (24%) between 2017 and 2018, from 83 to 63, while liquidations rose by 18%, up to 882 from 749.

In the last quarter of 2018 these trends reversed, with administrations rising 40% compared to October to December 2017, up to 21 from 15, while liquidations fell 16%, to 203 from 236.

Blair Nimmo, global head of restructuring for KPMG, said: “The latest insolvency figures reflect an annual increase in the number of businesses becoming insolvent in Scotland, which is disappointing but by no means alarming.

“Indeed, a quarterly comparison reveals a fall in the total insolvencies at the close of the year.

“That being said, it will be interesting to see how the stats move throughout 2019 as we begin to see the real impact of Brexit take hold.

“We have undoubtedly seen an increased nervousness across the business community in Scotland, which has only been exacerbated by the current political environment.

“Whilst it remains difficult to predict what impact the final Brexit outcome will have on businesses, we are encouraging clients across the sector to develop contingency plans, specifically in areas such as funding, working capital, supply chain, contracts and people.”

He said a sectoral analysis indicates that, irrespective of Brexit, retail is struggling due to pressures including rising costs, falling consumer confidence and increased online shopping.

Blair Nimmo
Blair Nimmo

Mr Nimmo said: “In 2019 so far, we’ve seen a number of UK household names enter administration, with the likes of HMV and others citing trading difficulties as a result of poor festive trading.”

He said the energy sector had also been hit as some smaller independent suppliers become insolvent due to structural issues, energy price caps and wholesale price volatility.

He added: “However, beyond retail and energy, there is no real pattern in Scotland.

“Throughout January we have noticed an uplift in general restructuring activity from companies requiring assistance in the generation of additional funding in response to a difficult trading environment.”