Scottish firms go bust at record rate

Scottish firms are going bust at their fastest-ever rate, official figures revealed today.

A total of 420 companies went into liquidation or receivership in the three months to 30 June, according to the Office of the Accountancy in Bankruptcy, the Scottish Government agency that collates such figures.

The total jumped by 22.4 per cent year-on-year and was up 9.1 per cent on the previous quarter, during which the previous record had been set.

Matt Henderson, a partner at accountancy firm Johnston Carmichael, warned there will be worse to come. He said: “The figures are only going one way and that’s up.

“Even when the economy comes out of recession, the peak in insolvencies will probably come about 12 to 18 months later, because that’s when the banks will think they can get higher prices for assets and start calling in debts.”

Bryan Jackson, corporate recovery partner at accountancy firm PKF, agreed. He said: “After the record number of corporate failures in the first quarter, I seriously doubted that the figures could get any higher and yet here we are facing corporate meltdown. The numbers are rocketing up and there is little hope of things improving.

“We have seen long-established, well-known businesses collapse in the past year and yet there appears to be no end in sight for the misery facing Scotland’s business community. It is undoubtedly due to a whole raft of factors including low consumer demand and confidence, with export markets in turmoil due to the European Union financial crisis and economic figures that are unrelentingly gloomy.”

Jackson added: “The concern is that when the recession does end – and there is little sign at the moment – will we have the infrastructure to grow Scotland’s economy? With such a depletion of the business stockpile, it is entirely predictable that growth will be slow because there will be fewer companies to grow the economy.

“Although I would like to think that the situation could not deteriorate any further the reality is that it is difficult to see anything other than more economic hardship in the months to come.”

Joanne Gillies, a partner at law firm Pinsent Masons, said: “It is notable that it is compulsory liquidations that have shown the most significant increase, up by almost 40 per cent on the same period last year.

“That would suggest that creditors are increasingly reluctant to accept further delays in payment in a market that shows no signs of improving. This effectively means that contentious insolvencies are on the rise and we’ll see more disputes played out in the courts.”

Gillies added: “Patience seems to be running out for those businesses that have been given time to trade their way out of trouble – either by financiers or other parties such as HM Revenue & Customs (HMRC).

“Research that we carried out in the past 12 months has demonstrated that HMRC in particular is becoming more aggressive. Our findings demonstrated that the number of petitions for bankruptcy filed by HMRC in Scotland has increased by 97 per cent over a three-year period.

“Also, the number of winding up orders issued by HMRC against businesses in Scotland has jumped by 75 per cent. That is in direct contrast to England and Wales, where numbers are headed in the opposite direction.”