Insolvencies dip as winding-up orders reduced

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A “VERY significant drop” in winding-up orders being initiated by the taxman has led to a 46 per cent fall in the number of Scottish companies going bust in the opening months of this year.

Figures published today by accountancy firm KPMG show the number of liquidations – which usually affect smaller companies – fell by 54 per cent year on year to 122 during the first quarter.

In February, HM Revenue & Customs dismissed repeated suggestions by accountants that it had run out of cash to pay for insolvency services as “nonsense”.

Insolvency practitioners are now waiting to see if the number of winding-up petitions increases this month following the start of the new fiscal year.

Blair Nimmo, head of restructuring for KPMG in Scotland, said: “It could appear the worst of the market turmoil is now behind us.

“Fewer smaller companies are going out of business year on year, while the total number of corporate insolvencies has decreased by a third in the past six months.”

But Nimmo warned: “These figures would also be viewed as slightly misleading. The key factor in the downward trend, especially in relation to liquidations, is the very significant drop in HMRC appointments.”

He added: “Looking beyond the statistics, our experience indicates fewer companies are finding themselves in difficulty. The banks are reporting fewer companies entering their support units and our clients generally appear in better health.”

Administrations and receiverships, which typically affect larger business, rose by 23 per cent year on year during the first three months of the year to 37.

KPMG’s figures come ahead of official data from the Office of the Accountancy in Bankruptcy, which are due to be published on 24 April. The firm prepares its own insolvency statistics based on announced administration appointments.