Commenting on the Scottish Insolvency Statistics, Q2 2015-16, Tim Cooper, Chairman of R3 in Scotland, the insolvency trade body says:
“The number of corporate insolvencies has fallen again after remaining stable in the last quarter.
“Record low interest rates and inflation since the recession are giving businesses an easier time than in the past. Creditor forbearance, particularly from banks, has also allowed many companies the opportunity to negotiate more preferable terms of repayment.
“However, these factors will not last forever. An imminent rise in the interest rate is a real prospect and could put increasing pressure on those businesses already on the edge. There are thousands of ‘zombie’ businesses just paying the interest on their debt and a rise of any size could prove a difficult test for them.
“The downward trend may also be understood in terms of the increased popularity of restructuring and non-insolvency debt relief schemes in the market. But it is important to remember that entering a formal insolvency procedure doesn’t necessarily equate to permanent financial failure. Last year the insolvency profession rescued two-in-five insolvent businesses. Seeking professional advice early should be a priority for any company struggling with its finances.”
“Although the latest results show an increase in personal insolvencies this quarter, they still represent a fall from this time last year and the longer-term trend is one of declining individual insolvencies in Scotland over recent years.
“There has been a wave of personal insolvencies caused by the pre-recession credit boom and the recession itself, and hopefully this has now come to an end.
“In this period of favourable circumstances – rising wages, low interest rates and inflation – people may be finding it easier to repay debts and get their finances in order.
“However, we know interest rates are not going to stay low forever. R3’s latest research found that a third (31%) of Scottish adults say an interest rate rise of one percentage point or more in the next 18 months would make them financially worse off. It’s important to plan ahead accordingly so that a rise won’t push people over the edge.
“While the results are good news, it’s worth remembering the statistics don’t tell the whole story. There are hundreds of thousands of people across the UK in non-statutory debt management plans. Consumer debt is a growing problem, and those struggling with their finances should seek professional advice as early as possible.”