One in five major Scots businesses 'financially stressed' - KPMG report

One in five large businesses in Scotland is “financially stressed” with the situation unlikely to improve until a post-Brexit trade deal can be thrashed out, a report today suggests.

Blair Nimmo, head of restructuring at KPMG in the UK. Picture: Contributed

Despite the negative trend, Scotland compares favourably to the rest of the UK, where a slightly higher percentage of businesses (24 per cent versus 21 per cent) are suffering financial stress and 4 per cent are facing “acute financial distress” (3 per cent in Scotland), according to the KPMG study.

Examining the filings of businesses with revenues in excess of £10 million, the firm’s analysis reveals that the sectors bearing the greatest number of companies in financial stress and distress are business services, building and construction, consumer production, leisure and hospitality, and industrial manufacturing.

Alan Flower, head of KPMG’s restructuring advisory team in Scotland, said: “No doubt Brexit uncertainty has had its impact on these results and despite recent progress on that front, until a trade deal is done, the impact assessed and then its operation experienced, uncertainty is going to be the new norm.

“The well-publicised problems in retail and casual dining are undoubtedly at the heart of the consumer markets and leisure and hospitality sectors appearing on the list of sectors whose performance has declined. But notwithstanding this broad analysis, well-run businesses that identify issues early and take action will always succeed despite macro-economic or sectoral issues faced.”

Consumer production (one in four) and leisure and hospitality (one in three) were found to be the sectors with the highest proportions of stress. Both industries have witnessed a marked increase in stress since 2017, KPMG noted.

Manufacturing

Meanwhile, business services and industrial manufacturing are showing stress in line with the Scottish average (one in five) and are tracking “largely flat” against the previous year’s results, the report added.

Only the building and construction sector is showing a lower proportion of businesses in stress than the Scottish average (one in six) and an improvement from the previous year.

Blair Nimmo, head of restructuring at KPMG in the UK, said: “The analysis reflects our historical experience of the Scottish economy – namely that it doesn’t experience the same levels of volatility as in England.

“When we drill into the data, the population experiencing more acute financial distress in Scotland has remained flat across the last five years.

“However business leaders in Scotland can’t rest on their laurels. The more disappointing results experienced elsewhere, in combination with increased signs of distress in Scotland is concerning.”

Recent official statistics showed that corporate insolvencies in Scotland for the whole of 2019 were 4 per cent up on the year before.