Rising cases of financial distress in the construction sector in Scotland are fuelling concerns over a knock-on impact on the wider economy, according to new figures.
The latest Red Flag Alert data from insolvency firm Begbies Traynor found that cases of “critical” financial distress recorded in the sector during the third quarter of 2019 had jumped by 30 per cent from the previous three months.
As well as the sharp increase in cases where winding up petitions or decrees totalling more than £5,000 were served against them, construction firms in Scotland also saw 3,600 instances of “significant” or early distress including minor decrees being issued against them.
The latest figures show that across all sectors, critical distress was markedly higher in Scotland than in the rest of the UK, rising by 32 per cent compared with the same period the previous year, and by 35 per cent since the previous quarter. In contrast, there was an increase of just 8 per cent year on year, and of 4 per cent quarter on quarter across the UK as a whole.
Other sectors that saw relatively high numbers of businesses experiencing both advanced and early signs of distress were support services, and bars and restaurants – where 1,150 firms were highlighted.
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Across all sectors, Scottish businesses saw a 2 per cent rise in significant distress compared with the third quarter of 2018, with 25,248 businesses now in this category. The picture for the UK was worse, with a rise of 5 per cent since the same quarter the previous year, representing 488,934 businesses.
Quarter on quarter, there was a 1 per cent fall in instances of ‘significant’ distress in Scotland, compared with a UK-wide rise of 1 per cent.
Ken Pattullo, who leads Begbies Traynor in Scotland, said: “After three years of economic turbulence following the 2016 referendum, we are continuing to see businesses in Scotland, particularly in certain key sectors, suffering from the ongoing uncertainty and a lack of investment.
“With growing levels of construction businesses experiencing signs of both early and advanced distress, there is real concern about the knock-on effect on suppliers as well as on the economy as a whole – businesses are simply unable to plan for the future in the current economic limbo in which they find themselves.
“Consumer-facing sectors such as bars and restaurants are also feeling the pinch, with confidence continuing to dive. It is painfully apparent that until we are given clarity on the economic situation post-Brexit, stagnation will remain as more businesses suffer.”
High-profile company collapses in Scotland during the quarter included Havelock International in Kirkcaldy where 250 jobs were lost.