Scottish business insolvencies up 21%
29/1/19.
Yesterday we briefly commented on this but given its seriousness we wanted to write further.
Analysts estimate that as many as 20 Scottish businesses will fold every week in 2019, as new statistics show that corporate insolvencies rose dramatically in the last twelve months.
Scotland saw a record number of businesses become insolvent last year, with the number of Scottish business failures up by over a fifth, according to research from the Accountant in Bankruptcy (AiB). Official figures show a 21% year-on-year increase in the number of Scottish businesses being declared bankrupt last year – rising from 780 in 2017 to 945 in 2018. Aside from marking a steep increase in insolvencies, the figures also amount to the highest number of Scottish business insolvencies in one year since 2012, as well as the fourth highest annual number ever.
Construction, retail and dining sectors most affected
Consumer uncertainty related to Brexit and an increase in competition are thought to be affecting business. In addition, rising cost pressures and market changes in some sectors appear to be a key factor in Scotland’s record insolvencies – with construction, retail and casual dining businesses accounting for over 41% of corporate failures in the first three quarters of 2018. The construction sector across the UK has been impacted by reduced lending, and the retail and dining industries have been challenged by recent shifts in consumer behaviour – caused in large part by the rise of e-commerce – with a string of major chains including House of Fraser and Jamie’s Italian facing insolvency last year.
Analysts are particularly concerned by the figures given the relative stability of the Scottish economy, with corporate lending cheap and unemployment levels low. French Duncan’s head of restructuring and debt Eileen Blackburn notes: “Under these circumstances you would expect insolvencies to be falling. That they are rising quite rapidly …is a worry for the coming years as more Scottish… firms will go bust.” She adds: “That this is happening when interest rates are at historically low levels, when unemployment is at a record low and the economy is growing indicates something more fundamental is happening”.
Businesses urged to seek professional advice
Scotland’s Minister for Business, Fair Work and Skills Jamie Hepburn similarly blamed “economic damage caused by Brexit” among other factors for the concerning rise in both corporate insolvencies and he urged companies to seek professional advice to protect their own businesses, stating: “In this climate, it is ever more important for people encountering financial difficulty to seek early advice and the appropriate solution.”
Enlisting the help of a professional credit advisory service can help businesses to strengthen their credit management systems, safeguard against market pressures and restructure where necessary to minimise and weather economic strain.
Credit management systems vital
If you sell goods or services on credit then you need to take steps to make sure you are not caught out by this rise in insolvencies.
CPA combines a suite of tools to help you identify quickly the risky prospects before you even trade with them and then afterwards get you paid quickly and efficiently.
CPA can help you put in place the systems you need.
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