Around 20 Scottish businesses are set to fail each week in 2019, an industry expert has predicted, after corporate insolvencies were found to have risen “dramatically” in the past year.
Continued uncertainty surrounding Brexit, an increase in competition and a squeeze on pricess in many sectors are all key factors, according to accountancy and business advisory firm French Duncan.
The Glasgow-headquartered company foresees continued difficulties for businesses after corporate failures rose “dramatically” in 2018, increasing by an estimated 25.8 per cent compared with the previous year, and equating to the highest annual figure since 2012.
Eileen Blackburn, head of restructuring and debt advisory at French Duncan, said: “I would expect around 20 Scottish businesses a week to fail in 2019, which indicates difficulties in certain sectors of the Scottish market.
“Undoubtedly uncertainty over Brexit, increased competition and downward consumer pressures on prices are all factors in causing business failure, but these figures reveal that certain sectors are suffering disproportionately as specific market changes impact upon them.”
Construction, retail and causal dining accounted for 41.6 per cent of all corporate failures in the first three quarters of last year, which Blackburn said highlighted “issues related to their specific markets”, as well as concerns over the wider economy.
Blackburn cited reduced lending to the construction sector and changing customer attitudes relating to retail and dining as resulting in many major closures. Notable casualties have included the collapse of outsourcer and construction services firm Carillion and high-street stalwart House of Fraser entering administration.
She added: “I believe that 2019 will continue to see serious problems in the high street impacting upon retailers and restaurants whilst construction will face more difficulties in an uncertain and volatile marketplace.”
The performance of Scottish businesses in 2018 was mirrored by financial figures for individuals, as French Duncan reported that last year’s level of personal insolvency in Scotland was the highest since 2013. The firm expects that around 12,000 Scots will have been sequestrated (the Scottish term for bankruptcy) or taken out a Protected Trust Deed by the end of 2018 and that a similar figure or more will go bust by the end of 2019.
Blackburn said: “The concern is that we have both rising personal and corporate insolvencies at a time when the economy is relatively benign, personal and corporate lending is cheap, and unemployment is low.
“Under these circumstances you would expect insolvencies to be falling. That they are rising quite rapidly in both personal and corporate is a worry for the coming years as more Scottish individuals and firms will go bust.”