Scotland insolvency statistics Q1 2023, R3 in Scotland response

26 July 2023

• Corporate insolvency numbers (liquidations and receiverships) in Scotland for Q1 2023-2024 increased by 19.7% compared with Q1 2022-2023, to a total of 292.
  • Corporate insolvency numbers in Scotland also increased by 21.7% when compared to pre-pandemic levels in 2019.
• The number of corporate insolvencies (liquidations and receiverships) in Scotland for Q1 2023-2024 decreased by 15.6% compared with the previous quarter’s total of 346 (January-March 2023).
• Overall, personal insolvency numbers (bankruptcies and protected trust deeds) in Scotland for Q1 2023-2024 increased by 2.9% compared with Q1 2022-2023, to a total of 2,098.
  • Personal insolvency numbers in Scotland also decreased by 40.5% when compared to pre-pandemic levels in 2019.
• The number of personal insolvencies (bankruptcies and protected trust deeds) in Scotland for Q1 2023-2024 increased by 9.5% compared to the previous quarter’s total of 1,916 (January-March 2023).

Commenting on the Scottish Insolvency Statistics, Q1 2023-2024 (1 April 2023 to 30 June 2023), Tim Cooper, Vice President of insolvency and restructuring trade body R3 and Partner at Addleshaw Goddard, said:

“The yearly rise in corporate insolvencies has been driven by a rise in the number of Compulsory Liquidations which can likely be attributed to the end of the temporary legislation that altered the process and criteria for these.

“Creditors’ Voluntary Liquidations are also almost 140% higher than they were in 2019 as a combination of the aftereffects of the pandemic and the challenging economic climate mean more and more directors are choosing to close their businesses before that choice is taken away from them.

"Despite the quarterly fall in corporate insolvencies, the past few months have continued to test the resilience of Scottish businesses, with rising inflation, stagnant economic growth, and persistent uncertainties around consumer spending and footfall just some of the issues they have had to contend with. Some sectors have managed to adapt, but for many businesses it's been tough to keep up with the rising costs while still making enough profit.

“As living expenses rise, more people are requesting pay rises. This presents a delicate balancing act for businesses as they must consider taking care of their employees' financial needs while also balancing their own books, and it’s a tough challenge to navigate.

“Despite these issues, there is a shared determination to get back on track. As the summer tourist season approaches, there’s been a surge in business confidence across Scotland and I’m hopeful that events like the Edinburgh Fringe and the UCI Cycling World Championships will bring further opportunities – particularly for the hospitality and leisure industries which are sorely needed after a tough year.

“While Scotland may narrowly avoid a recession this year, directors will need to keep a vigilant eye on their finances and seek help if they notice any signs such as mounting debts, declining revenues, or rising stock levels as any of these may indicate their business is struggling.

“Turning to personal insolvency, the quarterly increase has been driven by a rise in both protected trust deeds and bankruptcies. The year-on-year increase has been driven by a rise in bankruptcies, which have reached their highest level since Q2 2020-2021.

“The decrease in personal insolvencies when compared to pre-pandemic levels should be treated with some caution. This could in part be attributed to a bottleneck effect caused by a high volume of cases outstripping the availability of support. This backlog may be temporarily suppressing the numbers.

“Times are tough for personal finances in Scotland. Rising rent payments are a huge concern at the moment, with tenants in Glasgow and Edinburgh now using over a third of their wages just to pay for housing. For Edinburgh particularly (as reported by BBC Scotland this morning), the position for renters is made more difficult by a decreasing availability of homes to rent as landlords appear to be putting more properties on the market for sale as interest and other costs escalate, only leading to further pressures on rising rents. Homeowners with high loan-to-income ratios are also facing challenges as interest rates go up and their mortgage payments become even more expensive.

“On top of that, the cost of food, fuel and energy are still really high, adding further strain to already tight budgets. This burden is even more pronounced for people in rural areas, as transport costs have contributed to even higher prices for essential items like food and fuel compared to urban areas.

“With wages struggling to keep up with inflation, low-income households are being hit hard by the increased cost of living. Most of their wages are already going towards essential expenses, so with prices going up there’s just nothing left at the end of the month, and some are even resorting to credit cards and loans to bridge the gap.

“If you're struggling with debt or financial worries – whether as a business or an individual – it’s important to act as early as you can. Dealing with financial distress can be daunting, but by reaching out for help at the first signs of trouble you give yourself more time and more options to resolving your concerns.

“Most R3 members will provide a free initial consultation to discuss your situation and outline the potential options open to you to resolve it.”