Press, Policy & Research
News

 

R3 in Scotland responds to the Q1 2024 insolvency statistics

R3 in Scotland responds to the Q1 2024 insolvency statistics

24 July 2024

  • Corporate insolvency numbers (liquidations and receiverships) in Scotland for Q1 2024-2025 decreased by 3.1% compared with Q1 2023-2024, to a total of 283.
  • Corporate insolvency numbers in Scotland increased by 17.9% when compared to pre-pandemic levels in Q1 2019-2020 (240).
  • The number of corporate insolvencies (liquidations and receiverships) in Scotland for Q1 2024-2025 decreased by 6% compared with the previous quarter’s total of 301 (January-March 2024).
  • Personal insolvency numbers (bankruptcies and protected trust deeds) in Scotland for Q1 2024-2025 decreased by 2.1% compared with Q1 2023-2024, to a total of 2,056.
  • Personal insolvency numbers in Scotland decreased by 41.7% when compared to pre-pandemic levels in Q1 2019-2020 (3,526).
  • The number of personal insolvencies (bankruptcies and protected trust deeds) in Scotland for Q1 2024-2025 increased by 9% compared to the previous quarter’s total of 1,886 (January-March 2024).

Commenting on the Scottish insolvency statistics, Q1 2024-2025 (1 April 2024 to 30 June 2024) Richard Bathgate, Scotland Chair of R3, the UK’s insolvency and restructuring trade body, said:

“The main driver of the quarterly fall in corporate insolvencies in Scotland is a drop in compulsory liquidations, while the annual fall in numbers is due to a slight drop in Creditors’ Voluntary Liquidations (CVLs), which offsets the very slight increase we’ve seen in compulsory liquidations since this time last year.

“However, when you look at the corporate insolvency numbers for this quarter compared to Q1 2019, the picture is very different: Creditors’ Voluntary Liquidation numbers have more than doubled, while compulsory liquidation numbers have fallen by nearly a third. This suggests that creditors have been less aggressive about taking action to recover their debts than they were in 2019, but also that more directors are closing the doors of their businesses than they were then, and this is a reflection of the turbulent business climate firms have experienced since the pandemic and the range of economic issues that occurred during and after it, all of which have had an effect on businesses. 

“As CVL numbers have remained reasonably consistent over the last two quarters, it seems the economic growth we’ve seen since the start of this year has come too late for some Scottish businesses and hasn’t led to the upturn in revenue they needed to remain solvent.

“Despite the economic improvements and business confidence holding strong throughout the last quarter, the picture is still a challenging one for businesses in Scotland. The UK General Election introduced an element of uncertainty for businesses which has impacted the positive mood among businesses, and a further uptick in confidence will rely heavily on summer spending and activity, particularly during big events such as the Euros, the Edinburgh Fringe Festival, and the Highland Games, which are crucial for sectors like hospitality, retail and tourism.

“With the passing of the Circular Economy Bill, many directors will also be rethinking how their businesses operate this year. Food and hospitality services in particular will need to consider the impact of charges on single-use items like disposable cups and food containers, whether this will mean increasing prices or investing in reusable alternatives. These changes will need careful planning to manage costs effectively.

“Manufacturers and retailers will also need to adapt to new restrictions on unsold goods, potentially reducing their stock levels or exploring secondary markets. While these changes may present challenges, especially for businesses already facing financial difficulties, seeking professional advice early can help navigate the new regulations.”

Richard, who is a Restructuring Partner at Johnston Carmichael, continues: “Turning to personal insolvency, the slight yearly fall has been driven by a reduction in Protected Trust Deeds. While personal insolvencies have decreased compared to pre-pandemic levels, it's important to be cautious of these statistics, as this reduction may be partly due to a backlog, where the number of people seeking debt advice exceeds the capacity of available support.

“Meanwhile, bankruptcy numbers have reached their highest level since Q2 2020. This suggests that more people in Scotland are grappling with substantial levels of debt, and the combination of these debts and rising living costs has left them with little time to reach an agreement with their creditors.

“Despite a drop in inflation rates, costs continue to rise, albeit at a slower pace, which is keeping household budgets under pressure. The focus for many families across Scotland remains on paying for the essentials like rent, mortgage payments, and bills, and continuing to cut back discretionary spending on things like eating out and buying new clothes.

“The lifting of the 3% rent cap at the beginning of this quarter has also resulted in significant increases in rental costs across Scotland, especially in major cities such as Edinburgh and Glasgow. While the immediate impact on renters is clear, it will take some time before we can understand how this change will affect the number of people seeking personal insolvency advice.

"Whether you’re an individual facing money worries, or a director whose business is in distress, it’s crucial to act quickly at the first signs of trouble. Early intervention with the help of a qualified professional means that more options may be available to you, and you’ll have more time to think about how you want to move forward.”

Share this page
For more information please contact
Amelia Franklin
Amelia Franklin
0207 566 4203
Further Information & Articles
  • R3 Blog Member news, commentary and analysis from R3
  • Policy & Research Insights into the economy and the insolvency and restructuring, and recommendations for reform
  • Consultation Responses Our responses to Government consultations on insolvency and restructuring issues
Stuart McBrideStuart McBride
Senior Communications Manager
020 7566 4214
Amelia FranklinAmelia Franklin
Campaigns and Communications Executive
0207 566 4203
Find INSOLVENCY & RESTRUCTURING ADVICE

R3 members can provide advice on a range of business and personal finance issues. To find an R3 member who can help you, click below.