Scottish insolvencies have risen by more than 45 per cent this year amid economic uncertainty and a volatile retail environment, new figures suggest.
There were a total of 698 corporate insolvency appointments – businesses entering into administration, receivership or liquidation – in Scotland in the six months to June, representing a jump from 479 in the first half of 2018, according to the latest analysis from KPMG.
The accountancy group recorded 661 cases involving a company liquidation, while there were 37 administration and receivership appointments.
Although KPMG acknowledged the political uncertainty surrounding Brexit as creating “challenging conditions” for the business community, it blamed the rise on wider economic volatility, with a number of retailers among the most high-profile corporate casualties in recent months.
However, it said the results were “not all doom and gloom”, with the number of insolvencies in the three months to 30 June holding steady compared with one year earlier. It added that while there was a rise in the number of administrations, which usually relate to large businesses, the figure remains relatively low when compared to historic data.
Blair Nimmo, head of restructuring for KPMG, pointed to “signs of resilience” in the Scottish economy. He said: “The last quarter has remained far more static, and a number of industries are taking proactive measures to put themselves on a more stable financial footing, including retailers, hoping CVA [company voluntary arrangement] proposals could head off the prospect of administration.
“The ongoing Brexit discussions and change of Prime Minister and Cabinet have undoubtedly created a climate of uncertainty, but there are wider challenges at play, creating a toxic mix of issues for businesses going through a period of distress.”
He remained hopeful of sustainable economic growth and advised businesses in Scotland to “maintain a fiscally cautious approach, ensuring [they] maximise reserves, proactively and regularly review contingency plans and – ultimately – plan for any worst case scenarios.
“A number of challenges could be on the horizon, but with a resilient, focused approach, including taking appropriate advice at an early stage, Scotland’s business community can continue to grow sustainably in the long-term.”
The report comes two weeks after official statistics from the Accountant in Bankruptcy revealed Scottish corporate failures dropped by 15 per cent drop in the three months to June compared with the opening quarter.
Eileen Blackburn of insolvency and restructuring trade body R3, said levels of elevated insolvency risk for Scottish businesses remained static, adding that “a raised risk level may be the new normal’ for Scottish businesspeople”.