Concerns raised as Scotland suffers 'dramatic' rise in businesses facing advanced distress

Publishing its latest Red Flag Alert data, business rescue and recovery specialist Begbies Traynor said the emergence of the Omicron variant hampered growth for firms already impacted by two years of pandemic disruption.

According to the figures, businesses in Scotland suffered a 10 per cent rise in “critical” distress (which refers to businesses that have had winding up petitions or decrees totalling more than £5,000 against them) in the final three months of 2021, compared with the third quarter of the year.

This is markedly higher than the rest of the UK, which experienced a quarter on quarter increase of just 1 per cent, the report noted.

Publishing its latest Red Flag Alert data, business rescue and recovery specialist Begbies Traynor said the emergence of the Omicron variant hampered growth for firms already impacted by two years of pandemic disruption.

However, comparing Q4 2021 with the same period in 2020, levels of critical distress in Scotland fell by 33 per cent, compared with a 7 per cent increase across the UK as a whole, year on year.

Levels of early-stage or “significant” distress (which refers to companies that have financial problems such as minor decrees of less than £5,000 filed against them) in both Scotland and across the UK grew quarter on quarter at the end of 2021, but saw a fall year on year.

Ken Pattullo, partner for Begbies Traynor in Scotland, said: “Since the outbreak of the pandemic businesses have been on a rollercoaster ride.

“From complete lockdowns to ever-changing Covid restrictions or coping with spiralling demand amid global supply chain disruption and labour shortages, they have faced a tidal wave of challenges, all of which have heightened uncertainty and made planning and forecasting almost impossible.

“In this climate, it is no surprise that advanced financial distress is continuing to escalate for many businesses and it is particularly worrying that the situation appears to be more severe in Scotland.”

He added: “Unfortunately, looking at the year ahead, we are also faced with the likelihood of rising prices and inflation as energy costs increase dramatically, squeezing both businesses and consumers.

“With the government resisting calls to provide more help for firms struggling since the latest outbreak, together with the withdrawal of pandemic support and tax rises, there are still tough times ahead.”

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