Scottish Insolvency Statistics (Jul-Sep 2019): Comment from R3

23 October 2019

Commenting on the Scottish Insolvency Statistics, July to September 2019, Tim Cooper, Chair of R3 in Scotland, the insolvency and restructuring trade body says:

Corporate insolvencies

• The number of corporate insolvencies in Scotland fell by 1.7% in July-September 2019 compared with the previous quarter (April-June 2019), and rose by 1.3% compared with the same quarter the previous year (July-September 2018).

"This is the second quarterly fall in a row, in defiance of a general upward trend since the start of 2017 - but the Scottish corporate insolvency numbers have been bouncing around a fair bit from quarter to quarter, reflecting a generally unsettled working environment for businesses.

"Brexit uncertainty has, of course, been something Scottish businesses have had to deal with for some time, but it's not the only challenge businesses are facing. Our members have sometimes found that Brexit uncertainty has been used as a handy excuse to cover up other problems at companies they've worked with.

"Despite the quarterly fall, insolvency numbers are slightly higher than they were this time last year. The Accountant in Bankruptcy's numbers also don't cover the full range of corporate insolvency procedures available in Scotland.

"Businesses in Scotland still face a lot of headwinds. The manufacturing sector contributed to a fall in Scotland's GDP over the second quarter as stockpiling activity softened following the missed EU departure date of 29 March. Businesses which had built up supplies in preparation were left with plenty of stock to hand, reducing demand.

"And Scotland's manufacturers face fresh challenges in the form of a potential trade spat with the US, which may have an impact on our flourishing whisky sector. However, demand for blends and single malts from the rest of the UK - and the rest of the world - remains strong and should help to compensate for any loss of US business.

"R3's members in Scotland report that it is hard to pin down particular trends and sectors which are causing companies to falter at the moment - the sources of corporate distress appear to be fairly varied, although the construction, casual dining and retail sectors are home to more than their share of troubled firms.

"Whatever is at the root of a company's problems, speaking to an informed and professional third party, such as a licensed insolvency practitioner, can be a vital step on the way to returning to profit, while seeking advice as soon as possible will lead to the greatest possibility of rescuing a business, to everyone's benefit."

Personal insolvencies

• The number of personal insolvencies (bankruptcies and protected trust deeds) in Scotland fell by 1.7% in July-September 2019 compared with the previous quarter (April-June 2019), but rose by 12.6% compared with the same quarter the previous year (July-September 2018).

"The small quarterly fall in personal insolvencies (bankruptcies and protected trust deeds) is the first quarter-on-quarter reduction since this time last year and is not enough by itself to provide conclusive proof that the personal insolvency tide has turned, especially since the comparison with the same quarter last year is so stark.

"The reduction in personal insolvency numbers has taken place against a small rise in unemployment, although employment levels are still very high by historic levels. But once more, we would question whether the raw proportion of people in jobs - a very binary measure - tells the full story, as people may not be getting all the hours they want, for example.

"No-one can afford complacency, however, as the level of outstanding consumer debt continues to grow, albeit less rapidly than in the past. The interest on many credit cards is going up at the same time, indicating that financial services companies may be getting more nervous about consumers' ability to repay. The troubles seen in the casual dining and retail sectors are more signs that people's budgets are feeling the pinch.

"The price of fuel has tended to be higher in many parts of Scotland than in the UK overall, which is a double blow for many people who rely on their cars to get them to work, especially in rural areas, and pump prices stayed relatively high but fairly flat over the quarter in question, having risen sharply since January.

"A single piece of bad luck - a broken down car, a lost job, the end of a relationship, the need to seek new accommodation - can be enough to make someone's finances spin out of control. Anyone who can see trouble on the horizon should seek free and reliable debt advice from a regulated and professional source at the soonest possible instance, to stop problems from spiralling further."