Scotland insolvency statistics Q3 2021/22, R3 in Scotland response

26 January 2022

• Overall, corporate insolvency numbers (liquidations and receiverships) in Scotland for the year ended 31 December 2021 were 17.9% higher than in the year ended 31 December 2020, at 704 (2021) against 597 (2020).
• The number of corporate insolvencies (liquidations and receiverships) in Scotland rose by 13.3% in Q3 2021/22 compared with Q2 2021/22 and by 77% compared with Q3 2020/21.
• Overall, personal insolvency numbers (bankruptcies and protected trust deeds) in Scotland for the year ended 31 December 2021 were 16.9% lower than in the year ended 31 December 2020, at 7,543 (2021) against 9,078 (2020).
• The number of personal insolvencies (bankruptcies and protected trust deeds) in Scotland rose by 7.5% in Q3 2021/22 compared with Q2 2021/22 but there was no change compared with Q3 2020/21.

Commenting on the Scottish Insolvency Statistics, Q3 2021/22 (1 October 2021 to 31 December 2021), Richard Bathgate, Chair of insolvency and restructuring trade body R3 in Scotland and Restructuring Partner at Johnston Carmichael, says:

"The annual increase in corporate insolvencies has been driven by the rise in Creditors’ Voluntary Liquidations, which indicates that many directors are making the decision to close their businesses after struggling for more than 18 months to trade through the uncertainty of the  pandemic.

“One factor that will have played into the rise in corporate insolvencies was the ending of government COVID support measures.

“The furlough scheme provided critical support in retaining jobs and incomes.  In January 2021 it was supporting almost 400,000 jobs in Scotland. With that coming to an end in September 2021, along with the expiry of other support measures such as certain rates relief for Scottish retail, hospitality and leisure businesses and a range of state-backed loans, any businesses that were relying on government support would have had to make tough decisions about whether their company’s future was sustainable.

“Additionally, this winter the Omicron wave led to the reintroduction of some restrictions in Scotland, which will have particularly affected the hospitality sector during what is typically a busy time of year.

“Recent months have also seen inflation reach the highest level in over a decade. This trend is expected to continue through the next year, with the Bank of England and other forecasters predicting inflation will peak at six percent in the first half of 2022.

“Uncertainty around the Omicron variant meant consumer spending remained relatively low this Christmas, particularly compared to last winter, and as a result many businesses missed out on the boost in income the festive period usually brings.

"However, the benefits of a swift deployment of the booster vaccine roll-out are now starting to be felt, with nightclubs in Scotland having once again opened their doors and an expectation that Scotland’s work from home guidance may be relaxed next week, I hope we will soon start to see a return to some version of ‘normal’.

“The fall in annual personal insolvencies has been driven by a drop in Bankruptcies and Protected Trust Deeds. This reinforces the point that Government’s support measures have prevented the economic effects of the pandemic from translating into higher levels of personal insolvency by providing protection for those whose personal finances may have been hardest hit.

“However, the 7.5% Q3 2021/22 quarterly increase in personal insolvencies suggests that people are starting to struggle now those measures have ended and we may see personal insolvencies increasing as 2022 goes on.

“The end of the furlough scheme in September 2021, coupled with the slow but strong reopening of the economy, has meant that there has been little evidence of an increase in unemployment in 2021.

“Despite falling unemployment rates, 2021 saw the cost of living skyrocket for families, with rising fuel and energy bills, surging food prices and inflation hitting a near 30-year high, meaning many have been struggling, especially those on the lowest incomes.

“In addition, National Insurance is set to go up from April 2022, so those who are already finding it tough to make ends meet may find they have even less left over each month.

“Our advice to anyone worried about their finances remains clear: seek help from a qualified and experienced R3 member in Scotland at the earliest sign of financial distress. The earlier you seek advice, the more options you have for resolving your situation, and the more time you have to take a considered decision about your next step."