Corporate insolvency rates edge up in Scotland

Corporate insolvencies in Scotland were up by 4% in the third quarter of 2018-19, while Scottish personal insolvency rates rose by 18.1% in the same period, according to the latest statistics from Accountant in Bankruptcy (AiB)

There were 209 corporate insolvencies recorded for the period 1 October to 31 December, eight more than the same quarter in 2017-18.

This number included 129 compulsory liquidations, 80 creditors’ voluntary liquidations and 122 members’ voluntary liquidations. No receiverships were recorded in the last quarter.

 Overall, corporate insolvency numbers in Scotland for the whole of 2018 were 21% higher than in 2017, and were at their highest level since 2012.

Jim Cooper, chair of R3 in Scotland, the insolvency and restructuring trade body, said: ‘It’s not especially surprising to see corporate insolvencies in Scotland at a higher level in 2018 than in the previous year, as 2017 recorded the lowest number of annual corporate insolvencies for quite some time.

‘It is also worth noting that we may not be seeing the whole picture, as the statistics do not include administrations or company voluntary arrangements, nor the number of companies which were rescued outside of a statutory insolvency procedure.  

‘That said, the year on year increase in liquidations is nonetheless concerning. Consumer confidence in Scotland has been firmly in negative territory all year, and – as the higher number of personal insolvencies in Scotland confirms – many people are at the reaches of their personal budgets with no extra cash.’

The overall increase in Scottish personal insolvencies continues to be driven by growth in the protected trust deed (PTD) market, with 1,981 PTDs in the period 1 October to 31 December, an increase of 23.8% on the same quarter of the previous year.

Bankruptcies totalled 1,217, a 9.9% increase on the same quarter in 2017-18 when 1,107 were awarded. Total personal insolvencies which include bankruptcies and PTDs increased by 18.1% up from 2,707 in 2017-18 to 3,198 in 2018-19.

The Scotland-only Debt Arrangement Scheme (DAS) saw an increase in approved debt payment programmes with 668 awarded in the third quarter compared to 570 awarded in the same quarter last year.

Overall, personal insolvency numbers in Scotland for the whole of 2018 were 14% higher than in 2017, and were at their highest level since 2013.

Cooper said: ‘Annual numbers of personal insolvencies in Scotland have been rising every year since 2015, and 2018 continues this trend.

‘Ten years on from the start of the global financial crisis, many people have reached the limits of their borrowing capacity, and are – put simply – tired of being in debt. Debt consolidation and zero-percent interest rate credit cards will only go so far, and larger numbers of people are seeking a fresh start through a form of personal insolvency, rather than continuing in a holding pattern with interest and charges building little by little.

‘While this rise in personal insolvency is troubling, there is a silver lining in that there has been, to an extent, a shift in the culture around debt. People now are more willing to talk about their personal finance problems, and to seek help and advice, rather than bottling everything up until it escalates to a degree that can no longer be ignored.’

However, Cooper also pointed out that with consumers tightening their belts, there was likely to be a knock on effect for companies in sectors such as leisure and hospitality. 

Report by Pat Sweet

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