Corporate insolvencies in Scotland surge amid ‘troubling times’

Corporate insolvencies in Scotland leapt by almost 50 per cent in the three months to June compared with a year earlier amid “troubling times”, new figures have revealed.

Overall, corporate insolvency numbers - covering liquidations and receiverships - for the quarter rose by 49.1 per cent, year on year, while the figure was 1.3 per cent higher compared with the initial three months of 2022, January to March.

Richard Bathgate, chair of insolvency and restructuring trade body R3 in Scotland and restructuring partner at accounting firm Johnston Carmichael, said: “The increase in corporate insolvencies in [the latest quarter] compared to the same time last year has largely been driven by a 52 per cent increase in the number of creditors’ voluntary liquidations (CVLs) (131 compared to 199).

“This suggests that many company directors are making the decision to close their businesses rather than attempting to carry on trading in the current climate.

“Today’s figures highlight the economic pressures Scotland continues to face, with ongoing residual impacts of the pandemic, the rising cost of living and economic consequences of the war in Ukraine all affecting business performance.

“Businesses in Scotland have been hit hard by soaring prices of raw materials and fuel, which in turn has had a knock-on effect on consumer confidence. With footfall low and costs rising, for those businesses already operating in survival mode following the pandemic, particularly in sectors like retail and hospitality, these are troubling times.”

He added: “When it comes to personal insolvency, the figures published today show that while levels of bankruptcy remained the same when compared to last year, the overall rise in personal insolvency numbers over the last quarter was driven by an 11.8 per cent increase in the number of people entering a protected trust deed.

“Although unemployment rates in Scotland remain relatively low, rising inflation and price increases across the board are pushing many families into financial hardship. It is a particularly concerning time for people at the lower end of the income scale as they are less likely to be given inflation-matching pay rises while also being disproportionately affected by soaring costs of groceries, rent, heating and travel costs.”