Economic crisis: Scotland sees 'worrying' rise in businesses facing advanced distress
Scotland has seen a dramatic and “worrying” rise in the number of businesses teetering on the edge as the prospects for the wider economy worsen, new figures suggest.
Publishing its latest Red Flag Alert data, business rescue and recovery specialist Begbies Traynor said Scottish firms had seen a starker increase in advanced distress levels than the rest of the UK in the second quarter of 2022.
According to the figures, the number of Scottish businesses facing more advanced “critical” distress (which refers to companies that have financial problems such as decrees of more than £5,000 filed against them) leapt by 132 per cent compared with the same quarter in 2021, while the UK as a whole saw an increase of 37 per cent since the same period the previous year.
The latest report also revealed a 71 per cent increase in this type of advanced distress in the country in the second three months of 2022 compared with the previous quarter. In contrast, there was a rise of just 3 per cent across the UK as a whole, quarter on quarter.
In terms of “significant” or early-stage distress (which refers to businesses that have had decrees of less than £5,000 filed against them), Scotland saw a similar picture to that across the UK.
In the three months from April to June 2022, the country saw this type of distress fall by 13 per cent compared with the same period the previous year, while the UK-wide figure was down by 11 per cent. However, Scottish businesses performed more strongly quarter on quarter, seeing a 1 per cent fall in what is classed as significant distress while the UK saw no change.
Looking at how the Scottish business sectors have been impacted by early-stage distress in the last quarter compared with the opening three months of the year, those that performed most poorly were food and drug retailers, up by 6 per cent; printing and packaging, with an increase of 5 per cent; and food and beverages and industrial, both up 2 per cent.
In contrast, sectors which saw falls in significant distress since the previous quarter were financial services (down by 6 per cent); bars and restaurants, utilities and health and education (all down by 4 per cent); and construction, hotels and accommodation, and telecommunications (down by 2 per cent).
Ken Pattullo, managing partner for Begbies Traynor in Scotland, said: “It is worrying to see instances of ‘critical’ distress in Scotland already increasing by almost four times the UK-wide figure in Q2 2022 compared with the previous year, and also rising steeply quarter on quarter.
“While levels of early-stage distress here are closer to those across the UK and have seen a slight fall, many economists fear that the worst is yet to come. Unfortunately, the UK economy is continuing to be impacted by uncertainty over Brexit, together with ever-rising energy costs as well as supply chain issues as China undergoes further Covid lockdowns. We are warning Scottish businesses to prepare for a rocky road ahead.”