R3 in Scotland responds to the annual insolvency statistics

24 April 2024

• There were 1,168 corporate insolvencies in the year 2023-2024. This was an increase of 3% from 2022-2023’s figure of 1,132, an increase of 37% on 2021-2022’s figure of 854, and an increase of 23% compared to pre-pandemic levels in 2019-2020 (948).
• There were 8,085 personal insolvencies in the year 2023-2024. This was an increase of 1% on 2022-2023’s figure of 8,001, an increase of 4% on 2021-2022’s figure of 7,769 and a decrease of 40% compared to pre-pandemic levels in 2019-2020 (13,491).

Commenting on the annual Scottish Insolvency Statistics 2023-24, Richard Bathgate, Chair of insolvency and restructuring trade body R3 in Scotland and Restructuring Partner at Johnston Carmichael, said:

"Even though the figures published today represent a modest increase on last year, corporate insolvency in Scotland is at its highest level since the 2011-12 financial year [1,369] as the economic climate continues to affect the nation’s businesses.

“Compulsory liquidations have increased by more than 31% compared to last year as creditors chase down debt in an attempt to balance their own books, although it should be noted numbers for this process are still below pre-pandemic levels. Creditors’ Voluntary Liquidation levels have fallen slightly compared to last year, but 2023’s total is still more than double 2019’s as a large number of directors are winding up their businesses amidst a harsh trading climate.

“The biggest issues businesses in Scotland have faced over the last year are volatility in consumer confidence and the high costs of rent, energy and raw materials. All of these have contributed to a difficult year for firms, and forced their directors to balance rising operational costs with the demands of a workforce seeking higher salaries.

“Last April’s hike in Corporation Tax to 25% also added further strain on the finances of Scottish businesses. Directors are already having to keep a close eye on their profit margins, and this additional cost, along with further cost increases from all other angles, has only made it more challenging to keep cash flow steady.

“Looking ahead, while there's some optimism for a gradual economic recovery in 2024, this may come too late for some businesses. It’s clear that many directors are still having to make tough decisions about their long-term future, and it may be some time before we see insolvency numbers fully stabilise.

“Given the economy’s ongoing uncertainty, Scottish businesses will need to remain alert and adaptable over the coming months if they are to keep up with market conditions that appear to be changing almost every day, and Scotland’s business owners and directors will need to be alert to the signs of financial distress and act as soon as they show themselves.

“The slight yearly rise in personal insolvencies has been driven by an increase in both bankruptcies and statutory moratoriums, while protected trust deed numbers fell slightly over the same period.

“Bankruptcies were lower in Q4 2023-2024 than in Q3 and Q1, while protected trust deeds fell to the lowest total of the financial year in Q4 – a sign that Scotland's economy may be starting to turn a corner this year. But with the last year’s temporary rent caps and moratorium on evictions now lifted, we could see personal insolvencies take another hit in the coming year.

“Today’s figures are a clear sign that the cost-of-living crisis is far from over for many people in Scotland. Households are still feeling the pinch from high energy costs and persistent food inflation, with household essentials costing significantly more than they did two years ago. This has forced many families to cut back on their spending or dip into savings just to make ends meet.

“Despite recent reports suggesting a slowdown in price increases, real terms growth in wages has been sluggish so it will take some time for people in Scotland to truly feel a sense of relief. This is especially concerning for lower-income households, where the impact has been more severe. For these families, the road to financial recovery may be much longer and more challenging.

“There are many reasons why businesses and individuals find themselves facing financial difficulties. But whatever the reason, the best thing anyone in this situation can do is to seek advice as early as they possibly can.

“Talking about money can be really hard, but by speaking to a qualified professional at the earliest signs of financial distress, you’ll have more time to think about your next steps and more options for dealing with your concerns than if you’d waited for the situation to spiral.”