Personal and corporate Scottish insolvency rates climb

Provisional estimates show that in 2018-19 personal insolvencies in Scotland increased by 20.5%, while in corporate insolvencies rose by 9.3% according to statistics from the Accountant in Bankruptcy (AiB)

Personal insolvencies totalled 12,779 from 10,602 in 2017-18. Estimates for 2018-19 are provisional until final figures are published on 24 July 2019.

Most of the increase was down to protected trust deeds (PTDs), which increased by 32.9% on the previous year, reaching 7,917 compared to 5,958 in 2017-18.

Overall, the number of bankruptcies and PTDs rose for the third consecutive year but remain below levels seen between 2006-07 and 2013-14.

In 2018-19, there were 2,544 debt payment programmes (DPPs) approved under the debt arrangement scheme (DAS), 226 more than a year earlier, an increase of 9.7%. In 2018-19, £37.1m was repaid from debtors under DAS compared with £37.6m in 2017-18.

DAS allows those in the scheme the opportunity to repay their debts and get back on track financially without fear of further action from creditors and relief from additional interest and charges on their debts.

Looking at the quarterly figures for the start of this year, there were 3,272 personal insolvencies in Scotland in 2018-19 Q4 (January to March 2019), more than the 2,533 personal insolvencies in the quarter in the previous year (2017-18 Q4).

There were 1,223 bankruptcies awarded during this quarter, a 14.4% increase on the same quarter in 2017-18. PTDs increased by 40% to 2,049 over the same period.

There were 597 DPPs approved under DAS compared with 489 in the same quarter of 2017-18. A total of £9.4m was repaid through DAS during this quarter, compared with £9.3m in 2017-18 Q4.

AiB figures show corporate insolvencies increased from 884 in 2017-18 to 966 in 2018-19. The majority of corporate insolvencies are compulsory liquidations, which increased by 34.2% between 2017-18 Q4 and 2018-19 Q4.

The number of Scottish registered companies becoming insolvent or entering receivership increased in the fourth quarter of 2018-19, with 280 companies becoming insolvent compared with 259 in 2017-18 Q4. There were 137 members’ voluntary liquidations (solvent liquidations) in 2018-19 compared with 119 in 2017-18 Q4.

Commenting on the latest figures Jamie Hepburn, minister for business, fair work and skills, said: ‘These figures highlight the challenging economic times we are facing with more Scots experiencing increased financial pressures.

‘The ongoing uncertainty around EU exit, alongside the challenges of the roll out of universal credit, bear much of the blame.

‘In this climate it is more important than ever that people encountering financial difficulty seek early advice and the appropriate solution.

‘It is welcome to see an increase in the number of Scots accessing the Scottish DAS which helps them to pay back their debts. Recent reforms to the scheme will also allow more individuals in Scotland to benefit from this initiative going forward.’

Duncan Swift, vice president of R3, the insolvency and restructuring trade body said: ‘The jump in the number of corporate insolvencies in Scotland in the last quarter continues a long-standing trend, and indicates that many companies are finding market conditions tough at the moment.

‘Many distressed companies, especially in the retail and restaurant sectors, will have put their heads down and tried to get in as much cash as possible over the busy festive period – leaving difficult conversations about future options to the cold light of the New Year.

‘Unsurprisingly, Brexit is still making an impact on Scottish businesses here and now, as they put off investment in new equipment or processes, or build up stockpiles of essential supplies to insulate themselves from possible shocks in the future.

‘With uncertainty making business decisions trickier than usual, it has been simpler for Scottish firms to take on extra staff, rather than to spend money on new machinery or software. As unemployment is low, companies are feeling the pressure to raise wages to attract new staff, especially outside major cities and larger towns.’

Scottish Insolvency Statistics: January to March 2019 (2018-19 Quarter 4)

Pat Sweet

 

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