Red Alert: The Scottish businesses facing critical distress as Budget measures bite
The number of Scottish companies facing critical distress has surged, according to a “grim” report released just three months after a widely condemned autumn Budget.
Publishing its latest Red Flag Alert data, business rescue and recovery specialist Begbies Traynor said “critical” instances of financial distress leapt by 56.5 per cent to 2,353 in the final quarter of 2024, compared with the previous three months. It noted that the impact had been felt across almost every sector, while the increase in cases in Scotland was above the UK average rise of 50.2 per cent.
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Hide AdThe study, which provides a quarterly snapshot of British corporate health, also reveals that in the fourth quarter there was a 25.4 per cent increase in levels of businesses in Scotland suffering from “significant” financial distress compared to a year earlier, some four percentage points higher than the UK average rise.


This type of distress, which refers to deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth, was recorded in 32,696 instances in Scotland. Across the wider UK, there were more than 654,000 instances of business financial distress, and a marginally slower quarter on quarter rise of 3.5 per cent.
Begbies Traynor warned that almost every sector in Scotland saw rises in critical distress compared with the previous three-month period, with utilities (+275 per cent) and food manufacturing (+210 per cent) seeing the highest rises. The most affected sectors within Scottish firms experiencing significant financial distress since the previous quarter were professional services (+16.1 per cent), printing & packaging (+15.3 per cent), health and education (+13.1 per cent), hotels & accommodation (+13 per cent), and sports and health clubs (+12.6 per cent).
Seven of 22 industry categories monitored by the Red Flag report saw decreases in significant distress levels in Scotland, with bars and restaurants (-8.9 per cent), food and drug retailers (-7.4 per cent) and industrial transport and logistics (-5 per cent) accounting for the most recovered sectors during the traditionally busy Christmas period.
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Hide AdKen Pattullo, managing partner for Begbies Traynor in Scotland, said: “The huge jump in critical distress compared to last quarter hides a slight fall in that measure year on year, and can in part be attributed to seasonal peaks and troughs. However, the data for significant distress levels tends to predict future critical distress some months later, and is something of an early warning of widespread impact to come.
“Yet another quarter of increased distress is compounded by the imminent impact of the autumn Budget and increased associated costs for business. There is evidence that cost inflation, although lower than a year ago, is still trickling through the supply chain, and layer on top of that the additional costs of employing staff from April 2025 and things look fairly grim for the second half of the year.”
Employers are facing hikes in national insurance contributions and the minimum wage from April with many firms already warning of a negative impact on hiring and investment.
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