UK Government statistics* just released have revealed that there were 3067 personal insolvencies in Scotland in the quarter to 30th September, an increase of 23% on 2017. There were 232 corporate insolvencies, which is on a par with 2017, however construction, retail and hospitality accounted for more than 50% of the total.
Derek Forsyth, Head of Business Restructuring and Insolvency at Campbell Dallas, expressed concern: “On the personal insolvency side, this shows a substantial increase in the number of people who are now no longer able to make ends meet, and reflects to a large extent factors such as the lack of wage inflation, zero hours contracts, high utility costs and the general uncertainty over employment prospects”.
On the corporate side, Derek Forsyth highlighted that more than half of the companies going through an insolvency process in the quarter were in either the construction, retail or hotel and leisure sectors. “This trend is alarming, particularly as we go into a traditionally difficult quarter for the construction and rural hotel sectors, and whilst retail sales will generally be up, the traditional high street stores continue to be affected by high costs and online sales. The impact of the budget increase in the National Living Wage will affect margin, making trading conditions even more difficult”.
He added: “The construction sector in Scotland has seen a number of high profile casualties in the last few months, with a large number of creditors losing out, and employees losing their jobs. There has been much commentary recently about the potential adverse impact of Brexit on EU citizens working in the hotel and leisure sector, and on the retail side, whilst such as House of Fraser will always attract headlines, there are many medium and smaller outlets similarly being affected. The proposed reintroduction of Government preferential claims from 2020 in the Budget will adversely affect the returns to the ordinary creditors.”
Derek Forsyth urged companies to plan ahead for the next quarter, which is traditionally challenging, with cash flow problems being a frequent cause of failure: “It is vital that directors and stakeholders take all steps to plan ahead and ensure that their businesses are robust and financially viable, and do not become part of the next quarter’s statistics.”
For more information, contact Derek.Forsyth@campbelldallas.co.uk or call 0141 886 6644.
The information in this article should not be regarded as financial advice. This is based on our understanding in November 2018. Laws and tax rules may change in the future.
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