Rising tally of Scots firms in trouble passes 12,000

Scotland's levels of business distress were up by 19 per cent in the first quarter of 2011 against the same period last year, according to figures released yesterday by business rescue and recovery specialist Begbies Traynor.

Across the UK, 186,000 companies were facing "significant" or "critical" financial problems, up 15 per cent year-on-year.

The firm's Red Flag Alert report said 12,281 of these were based in Scotland, of which 318 were classed as critical.

A recent report by the Scottish Government showed there are about 300,000 businesses in Scotland, of which 99 per cent are small to medium enterprises.

Ken Pattullo, group managing partner in Scotland for Begbies Traynor, said: "Following last quarter's figures that showed Scotland faring better than the rest of the UK, these numbers are unwelcome, although not altogether unexpected.

"We are seeing a worrying spread of distress across a great number of business sectors with business-to-business support and professional services particularly suffering."

The business-to-business support services sector accounted for a third of the instances of distress north of the Border, followed by the construction sector with 13 per cent of the total.

In the UK as a whole, restaurants and bars were among the worst hit, as consumers cut back on discretionary spending. The sector showed a 68 per cent jump in the number of firms in difficulty.

Begbies Traynor executive chairman Ric Traynor said a fall in consumer confidence and spending power, driven by anti-cipated job losses, lay at the core of the leisure sector's troubles.

The report is based on legal and financial data. Companies with "significant problems" are those with either a court action against them or poor, insolvent or out-of-date accounts.

Businesses with county court judgeents totalling 5,000 or more, or wind-up petitions against them, are classed as "critical".

The report came ahead of today's consumer confidence index from the Nationwide, which shows a small uplift in sentiment in March.

The index stood at 44, up from an all-time low of 39 in February, but well below the long-term average of 80.

Robert Gardner, Nationwide's chief economist, said: "With the recovery still proving sluggish, it is unlikely that we will see a significant improvement in the coming months. It is far more likely that confidence will remain subdued for several months yet until the economy gains greater momentum.

• Begbies Traynor today announced the sale of part of Smiths of Peterhead, a 192-year-old fabric firm that went into administration in February.The deal will recover more than 400,000 for creditors while saving the spinning business operated from the firm's factory in Mintlaw, Aberdeenshire. Smiths' other weaving centre, at Buchan Braes, Boddam, will close with the loss of 20 jobs.