Fresh fears for economy as firms edge closer to collapse

Ken Pattullo said Begbies Traynor's report had flagged concerns about the retail sector's prospects
Ken Pattullo said Begbies Traynor's report had flagged concerns about the retail sector's prospects
Have your say

Distress levels among Scottish businesses have soared while falling elsewhere in the UK, raising fresh fears over the health of the economic recovery north of the Border.

In its latest “red flag alert”, business rescue and recovery practice Begbies Traynor said critical instances of business distress, often indicating an impending business failure and including decrees totalling over £5,000 or winding-up petitions, showed a year-on-year jump of 11 per cent, to 118 from 106.

This contrasts with the UK average drop of 4 per cent, and the new data is the latest indication that the economy north of the Border is lagging behind the UK amid the continued knock-on effect of troubles in the oil and gas sector.

It was revealed this week that Scottish GDP growth trailed the UK in the third quarter of last year, at 0.1 per cent and 0.4 per cent respectively, with the difference blamed on the collapse in oil prices.

READ MORE: John Swinney praises ‘encouraging’ 0.1% economic growth

“The continued pressure on the oil and gas industry and the supply chain has obviously had significant impact during 2015, and that dynamic continues,” Ken Pattullo, group managing partner in Scotland for Begbies, said. “The utilities sector saw the highest rise in significant distress year on year, showing that this sector hasn’t seen the last of the potential failures and distress.”

The firm said sectors hit the most severely by critical distress in Scotland were bars and restaurants, hotels and accommodation, professional services and retail.

Patullo commented: “The retail sector can be a good barometer of issues that impact the wider economy and it always suffers when spending power reduces.

“However it is unusual to see numbers of retailers fall so badly in what is traditionally their best season, and this causes some ongoing concern about the prospects for the sector in 2016.”

He added that overall, distress in the third quarter “was pretty well shared across the whole range of Scottish businesses, with few sectors escaping the pressure at the moment”.

Scotland however matched up exactly to the UK on “significant” business distress, which indicates the early signs of financial problems. Both grew by 17 per cent from the year-ago quarter.