Signs of hope as company failure risk levels drop

FEWER Scottish companies are facing a high risk of failure, a survey published today shows.

Business recovery specialist Begbies Traynor said the number of firms reporting serious problems such as court actions or winding-up petitions fell in the first quarter year-on-year by 31 per cent in Scotland against a UK average of 17 per cent. But the same quarterly Red Flag Alert survey found a 44 per cent rise in the number of companies reporting they were in “significant” or “critical” distress since the last quarter of 2011.

The quarter-on-quarter rise was mainly attributed to seasonal trends that see the annual peak of distress after Christmas, and is also well below the UK average rise of 55 per cent, Begbies said.

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The construction sector remains the most troubled, with an 18 per cent share of the country’s instances of critical distress – such as winding-up petitions – and 15 per cent of less serious but “significant” distress, such as court actions or poor, insolvent or out-of-date accounts.

Property services firms accounted for 9 per cent of significant distress and 4 per cent of critical instances, the survey found, with bars and restaurants also affected.

Ken Pattullo, group managing partner in Scotland for Begbies Traynor, said: “To see any fall in distress is welcome, and the underlying year-on-year trend is very encouraging both across the UK, but particularly here in Scotland where we have seen sustained high periods of failure for some time now.

“Despite the overall fall there is still a fairly broad spread of distress across all sectors here, with construction and property distress up slightly on a year ago and bars and restaurants also higher.

“As with the rest of the UK though, manufacturing is leading the overall recovery and balancing the harder hit sectors.”