The number of Scottish firms failing in 2018 rose 21.2% according to analysis of the latest figures by accountants and business advisers French Duncan LLP. The latest Accountant in Bankruptcy (AiB) figures (AiB uses financial year so their current statistics show the period from October to December as the third quarter whereas we are using the calendar year) show that 945 Scottish firms failed during 2018 compared with 780 the previous year.
Eileen Blackburn is Head of Restructuring and Debt Advisory at accountants French Duncan LLP, explained: “The increase in the number of corporate insolvencies in 2018 is of great concern. This is the highest annual figure since 2012 and is the fourth highest figure ever.”
“That this is happening when interest rates are at historically low levels, when unemployment is at a record low of 3.7% of just 100,000 people, and the economy is growing indicates something more fundamental is happening. Problems with the viability of the High Street, continued uncertainty over Brexit and the consequent reduced investment, and shifting consumer buying have all had an impact.”
Eileen continued: “The problem is that with interest rates only going one way, with continuing confusion over the UK’s future relationship with Europe, and with the political situation in turmoil it seems likely that many businesses will face even more difficulties in the coming year. Those with close economic ties to the EU or who rely heavily on European staff in areas such as hospitality, retail, and agriculture will all have serious financial issues to address in the coming year.”
“Business owners must monitor costs, ensure that debts are reduced, and cash flow maintained. In this way many firms will ensure that they are not unduly impacted by any future economic turbulence. For certain sectors, such as construction, retail and casual dining, there are other factors which are causing financial issues apart from Brexit which need to be addressed. The continued problems in the High Street will undoubtedly lead to more failures of retailers, casual dining outlets and other stalwarts of our town and city centres. Meanwhile the restructuring of major players in the construction industry could have long-term knock on effects on the viability of many smaller, suppliers and contractors in the sector. Any business experiencing any signs of financial issues should seek to address these immediately before the problems become unsurmountable.”
Eileen concluded: “There are always periods when corporate failures rise and fall but this one is unusual. The last peak was in the years immediately after the financial crash when such outcomes were to be expected. But this time it is happening when the economic position is more positive. Does this highlight an underlying serious problem with the economy or is it simply a temporary blip due to external pressures while markets realign themselves and settle at their own level? The next few months will be telling but, in the meantime, I think that many more Scottish firms will go bust until greater stability can be established in the Scottish economy.”
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