Insolvencies ‘spike’ as Scots economy improves

A SPIKE in the number of companies going bust is a sign that the economic outlook is improving, analysts said yesterday.

HBJ Gateleys Yvonne Brady said signs were positive

Official figures from the Accountant in Bankruptcy showed the number of firms being liquidated or entering receivership jumped by 45.7 per cent quarter-on-quarter between July and September to 268.

Yvonne Brady, head of corporate restructuring at law firm HBJ Gateley, said: “Although at first glance this may look bad, the current level of failures actually indicates improving conditions in the market.

“Resurgent economies often experience a spike in insolvencies as the weaker players are no longer able to compete against stronger competitors and that is what we are seeing here.”

Brady added: “This quarter has seen a large increase and these figures could finally suggest the bulk of corporate insolvencies are behind us as the economy returns to growth following a number of positive indicators. A rise in interest rates in the near future, however, could bring about a further spike as firms struggle to service debt.”

The number of failed firms fell by 2.2 per cent year-on-year.

Bryan Jackson, a partner at accountancy firm BDO, added: “In Scotland, I think we are likely to see more corporate failures in the months, and even years, ahead as the economy improves slowly and markets adjust to a different operating system. It is clear that we will not be returning to the boom years of 2007.”