Scotland sees sharp fall in number of companies in dire straits - latest Red Flag Alert

Scotland’s economic backdrop is improving with the first fall in nine months in the number of companies displaying signs of “critical” financial distress, a new report suggests.

Monday, 27th January 2020, 7:51 am
Looking across the UK, Scotland saw one of the greatest quarter-on-quarter falls in critical distress in the last three months of 2019. Picture: Jon Savage

The latest Red Flag Alert from insolvency specialist Begbies Traynor shows that during the final quarter of 2019 there was a 28 per cent fall in critical, or advanced financial distress, which refers to businesses that have had winding up petitions or decrees totalling more than £5,000 against them. It marks the first year-on-year fall in three quarters.

Some of the sectors which showed the greatest improvement were hotels and accommodation (80 per cent decrease in critical distress), bars and restaurants (67 per cent fall), property (71 per cent drop) and construction (down 43 per cent).

Looking across the UK, Scotland saw one of the greatest quarter-on-quarter falls in critical distress in the last three months of 2019, with a decrease of 41 per cent, compared with the UK-wide drop of just 13 per cent, and second only to Northern Ireland.

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Ken Pattullo, who leads Begbies Traynor in Scotland. Picture: Contributed

However, some sectors in Scotland did see a rise in critical distress levels, compared with the same period in 2018, including manufacturing, financial services, food and beverage, leisure and cultural, sports and health clubs, as well as wholesale.

Levels of businesses in Scotland experiencing what is termed “significant” distress – minor decrees against them – also appear to be stabilising, according to the latest alert report.

Ken Pattullo, who leads Begbies Traynor in Scotland, said: “During much of the past year, Scotland has generally fared worse than other parts of the UK, often seeing a double-figure rise in advanced distress compared with the same period the previous year. It is reassuring to see the country now doing better than the rest of the UK and starting to recover from the uncertainty and disruption of the last three years.

“It is particularly pleasing to see the resurgence of construction, often the bellwether of the economy. Hopefully, with the general election behind us, businesses can start to plan for their post-Brexit future although they still await clarity on many aspects of the deal.”

Figures released last week suggested that conditions may be harshening for Scottish businesses after an increase in the number of firms going bust last year.

The latest official statistics showed that corporate insolvencies in Scotland for the whole of 2019 were 4 per cent up on the year before, at 980, putting them at their highest level since 2012.

The number of insolvencies actually fell by 4 per cent in the October to December period, compared with the previous three months, but were up 8 per cent, year-on-year, compared with the final quarter of 2018.

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