Are we beyond the insolvency peak?

Innovation is key to delivering a bright future for Scottish businesses (Picture: Adobe)Innovation is key to delivering a bright future for Scottish businesses (Picture: Adobe)
Innovation is key to delivering a bright future for Scottish businesses (Picture: Adobe)
We must come together to protect the future of Scottish business

At the start of 2024, news headlines painted a picture of economic instability for Scottish business and the UK as a whole. But while the UK Insolvency Service reported business insolvencies were at an all-time high in 2023; are we now beyond the 'perfect storm of financial distress' that some had proclaimed?

Contrary to the doomsday narrative, Nowres Mohatam, analyst at the Finance and Leasing Association (FLA), suggested a more nuanced perspective. While it's undeniable that insolvency volumes reached significantly high levels, the insolvency rate per 10,000 active companies in 2023 (53.7) paled in comparison to the peaks observed during the 2008/2009 financial crisis (94.8). Moreover, a surge in voluntary insolvencies suggested a proactive approach by business leaders in managing their financial affairs, rather than succumbing to external pressures.

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For Scottish businesses, the prevailing concerns seem to echo those reverberating across the UK— inflation uncertainty, wage pressures, sluggish payments within the supply chain, and escalating operational costs. Additionally, access to funding options still remains a pivotal issue, especially for businesses operating outside the hubs of Edinburgh and Glasgow.

William Devine is Head of Scotland at Simply Asset FinanceWilliam Devine is Head of Scotland at Simply Asset Finance
William Devine is Head of Scotland at Simply Asset Finance

But in the face of these challenges, what recourse do businesses have? While refinancing and debt restructuring can be viable options for business leaders, they must also foster transparent dialogue with their creditors. In our experience, honest conversations about their financial realities can often lead to mutually beneficial solutions, helping to avert looming concerns of insolvency.

Looking beyond individual business support, there's also a growing need for systemic government change. Initiatives aimed at bolstering businesses across the whole of Scotland will be crucial for fostering a more inclusive and resilient Scottish economy. By diversifying investment and resource allocation, policymakers must ensure that the benefits of economic growth are distributed equally across all regions.

And yet, despite this uncertainty, one thing remains abundantly clear: the resilience of Scottish businesses. Despite the prevailing headwinds, there's determination to weather the storm and emerge stronger on the other side. As we progress through the economic cycles, it's this spirit of resilience that serves as a promise for the future of Scottish business.

Furthermore, broader forecasts paint a picture of cautious optimism for Scotland's economy. Despite persistent high interest rates and inflation exceeding targets, Scotland looks likely to avoid recession. Major cities like Edinburgh and Glasgow are also expected to outperform the Scottish average, underscoring the importance of regional disparities in economic resilience.

Even so, as we look ahead, it's vital that we heed these insights and adopt a collaborative approach to safeguarding the future of Scottish business. By fostering innovation, enhancing access to finance, and championing regional development initiatives, we can lay the groundwork for a more inclusive and prosperous economy —one where every Scottish enterprise has the opportunity to thrive, irrespective of location or sector.

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