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26/04/2017

R3 comments on the Scottish insolvency statistics for 2016-17

Commenting on the Scottish Insolvency Statistics for 2016-17, Tim Cooper, Chair of R3 in Scotland, the insolvency and restructuring trade body says:

Personal insolvencies up:

  • The numbers of personal insolvencies in Scotland rose by 18% in 2016-17 compared with 2015-16, to 9,958.

“Scottish personal insolvency numbers have started to creep up again.

“A direct comparison with 2015-16 is tricky given the impact of the introduction of the Bankruptcy and Debt Advice (Scotland) (BADAS) Act 2014, which kept numbers low last year as the market adapted. But it’s worth noting that insolvencies are higher now than they were in the final quarter before BADAS was introduced.

“There are certainly some new factors putting upward pressure on insolvency numbers.

“Inflation is rising, while real pay has not kept pace with increases in the price of essentials like food and fuel. For many people whose finances were already precarious, this may have been enough to put them in a position where they have to consider entering a formal insolvency procedure. Many more people who depend on current low interest rates to make borrowing affordable may find their finances squeezed when rates rise.

“Scotland is particularly sensitive to inflation as a relatively high proportion of Scots have fixed incomes, which makes coping with price rises difficult.

“According to R3’s latest research with ComRes, more than a third (36%) of Scottish adults say they are worried about their current level of debt, and more than two in five (43%) say they often or sometimes struggle to make it to payday.

“That said, it should be remembered that insolvency numbers are far lower now than they were in the aftermath of the recession. Numbers may be rising, but this is a very small rise compared to the decrease in numbers we’ve seen since 2008-9.

“The new figures should be a reminder to everyone that taking charge of your finances is vital, as the earlier you address problems, the more options you have open to you. I would strongly advise anyone worried about their finances to seek impartial advice from a properly qualified professional.”

Corporate insolvencies down:

  • The number of corporate insolvencies in Scotland fell by 7% in 2016-17, compared with 2015-16, to 840.

“Despite tougher economic conditions for Scottish businesses over the last 12 months, it’s encouraging to see firms are proving resilient. Recent R3 research found that Scottish companies overall are the most stable in the UK, with only 20% at greater than average risk of insolvency, compared with a UK average of 25%.

“The process of restructuring undertaken by many of Scotland’s oil and gas businesses over 2016 may be bearing fruit, helping related companies – especially in the North East – to stay afloat.

“Consumer confidence held up remarkably well across 2016, which will have boosted many companies’ results. Whether this confidence will continue is trickier to predict, but with inflation rising, the willingness of the Scottish public to carry on spending may shrink in 2017.

“Rising inflation and lower growth may see some question marks emerge about the health of the Scottish economy this year so it makes sense for any company facing cashflow issues to seek qualified, professional advice ahead of the curve. If nothing else, the previous twelve months have shown us that received opinion can easily be mistaken, and planning for a number of political and economic solutions is prudent.”

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see www.r3.org.uk for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
     
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.