Record numbers of Scottish businesses going to the wall

Almost 1,100 Scots businesses failed in 2010, the highest ever figure and a 46 per cent increase on 2009, as companies struggled to cope with a changed marketplace and subdued demand.

Insolvency experts said the data was of "great concern" and cast doubt on the ability of the private sector to pull the Scottish economy through the forthcoming government austerity cuts.

The research, which covers both receiverships and liquidations, was published on the same day as Scottish GDP figures showed that economic growth slowed substantially in the third quarter of 2010, falling to 0.5 per cent from 1.3 per cent during the previous three months.

The Scottish Chambers of Commerce (SCC) today warns that growth is likely to have slowed further in the fourth quarter, with problems in key sectors such as services exacerbated by the Arctic weather.

Anne Buchanan, corporate recovery partner with PKF, cautioned that there is unlikely to be any let-up in the number of well-known Scottish firms falling by the wayside this year "or, indeed, over the next couple of years".

She said the situation could become particularly severe if the Bank of England's monetary policy committee substantially hikes interest rates.

"This dramatic increase in the number of Scots companies going bust during 2010 is of great concern," she said.

"If the economic recovery is to be led by the private rather than the public sector it is very worrying that there is such a high level of corporate failure.

"That this has occurred at a time of relatively benign interest rates is also of great concern as this is a clear indication that almost any rise in the base rate is likely to place already fragile businesses at even greater risk of failure."

Among last year's biggest failures in the corporate sector were the collapse of Dundee-based games firm Realtime Worlds, which was founded by the creator of Lemmings and Grand Theft Auto, the milk co-operative Dairy Farmers of Britain and PWB Health, the company behind a self-testing kit for breast cancer.

R3, the insolvency trade body, said many businesses have been unable to overcome lacklustre demand and stricter lending conditions.

John Hall, Scottish council member of R3, added that the withdrawal of HMRC's "time to pay" scheme, which allowed companies to spread payment of VAT and corporate taxes over several months, is likely to have a substantial impact.

He said many businesses which used the scheme through the recession are now facing "enormous debts and no means to pay"."The result is likely to be further large scale corporate failures in the coming year and beyond," he added.

However, yesterday's figures offered some good news on the number of individuals declaring themselves bankrupt.

Personal insolvencies dropped by 11 per cent in the final three months of last year compared to the previous quarter.