BANKS and other creditors are being more supportive of struggling businesses, according to an insolvency expert, leading to a fall in the number of companies that have failed.
Figures released yesterday by the UK government’s insolvency service showed the number of Scottish firms that failed between April and June dropped by 58 per cent year-on-year.
Just under 200 businesses went into administration, liquidation or receivership, or signed voluntary agreements with their creditors during the second quarter, compared with 468 in the same period last year.
Matt Henderson, head of business recovery an insolvency services at accountancy firm Johnston Carmichael, said: “Without the support of creditors, particularly the banks, many more struggling companies would be failing and these statistics would be much worse than they are.
“Creditors of companies are clearly keen to receive something back against a debt rather than the expectation of a potentially smaller return through a formal insolvency procedure and are looking at extended repayment terms as a way of achieving this.”
Melanie Giles, an insolvency practitioner at PJG Recovery agreed. She said: “Both the banks and private creditors are still nervous about pulling the plug and are concerned that calling in their debts will see them lose everything.
“The resurgence of the economy is also making creditors more likely to wait, as they hope the companies they are owed money by somehow rebound. But in many cases this is overly optimistic.”
The number of Scottish business failures edged up by 7 per cent quarter-on-quarter after a rise in the number of construction firms, hotels, restaurants and retailers hitting trouble.