Scottish corporate insolvencies up nearly 50%

Corporate insolvency numbers in Scotland increased by 49.1% from the same time last year with 243 insolvencies in the last quarter

This figure was up from 163 in the first quarter of the year with personal insolvencies rising by 8.1% over the same period.

Corporate insolvencies include compulsory liquidations, creditors’ voluntary liquidations, and receivership appointments. Compulsory liquidations rose by 37.5% between Q1 2021 and Q1 2022 Creditors’ voluntary liquidations increased by 51.9% in the same period.

The statistics from Accountant in Bankruptcy (AiB) compiled essential information on personal and corporate insolvencies in Scotland.

Richard Bathgate, chair of insolvency and restructuring trade body R3 in Scotland and restructuring partner at Johnston Carmichael, said: ‘The increase in corporate insolvencies in Q1 compared to the same last year has largely been driven by 52% increase in the number of creditors’ voluntary liquidations (CVLs).’

Rather than trading in the current climate, many directors are choosing to close their businesses.

‘The figures highlight the economic pressures Scotland continues to face, with ongoing residual impacts of the pandemic, the rising cost of living, and economic consequences of the war in Ukraine all affecting business performance.’

Businesses in Scotland continue to be hit hard by rising prices of fuel and raw materials, placing strain on consumer confidence. Extended pressures from rising inflation and price spikes across the board – particularly in retail and hospitality sectors – are pushing many businesses into financial hardship.

The Recovery Loan Scheme, which supports access to finance for UK businesses and recovery from the disruption of the Covid-19 pandemic, came to an end in June. Current levels of corporate insolvencies are similar to pre-Covid levels.

‘The government’s Recovery Loan Scheme, which offered a lifeline to many small businesses in Scotland, finally came to an end in June, so it’s too early to tell what impact this will have on insolvencies.

‘However, last week it was announced that a successor scheme will be open for applications in August – which will hopefully help mitigate any rise in business insolvencies in the autumn,’ said Bathgate.

Last week, the government announced that the Recovery Loan Scheme will be extended for two years but will now require a personal guarantee for all loans. Applications for the £4.5bn scheme will open on 1 August and run until 30 June 2024.

Useful links

Croner-i Navigate provides guidance, commentary and tools for insolvency. See the Insolvency Quick Link and the Insolvency section of the Company Secretaries and Directors Guide for a selection of these resources

Max Austin |Reporter, Accountancy Daily 

Max Austin is a reporter at Accountancy Daily.If you have any news stories, please email me at: ...

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