Failures rise

Insolvencies soar 40% as Covid support ends

lock on gates at bar

Many firms failed to reopen after being forced to shut

Forecasts of a rise in company failures as government support measures came to an end are borne out by a 40% rise in corporate insolvencies across Scotland in the third quarter.

Insolvency practitioners have been hiring extra staff in anticipation of a surge in company failures.

As well as the withdrawal of Covid-related subsidies from the Treasury, inflation and supply chain pressures also began to bite.

Analysis of notices in The Gazette by Interpath Advisory reveals that 14 companies fell into administration or receivership from July to September 2021 – from 10 in Q2, and also up on the 10 appointments seen during the same period last year.

This upward trend mirrors the national picture, which saw UK administrations and receiverships increase by 26% in the third quarter of 2021 – from 123 in Q2 2021 to 155 in Q3.

However, this was significantly down from the 243 appointments during the comparative period in 2020, and is still at only 39% of pre-Covid levels when compared to the 401 appointments in Q3 2019.

Blair Nimmo, chief executive of Interpath Advisory, commented: “With inflation on the rise, COVID-19 support measures, including the Job Retention Scheme, now tailing off, and well-publicised issues affecting global supply chains and availability of labour, it’s perhaps unsurprising that we are starting to see a modest rise in insolvency levels as we enter the final quarter of the year.”

Blair Nimmo

Blair Nimmo: a challenging quarter

Across the UK, the construction and energy sectors saw the largest rise in levels of administrations and receiverships in Q3 2021, with three times as many filings for insolvency in the energy sector (nine appointments) and twice as many filings in the construction sector (34 appointments) compared to the previous quarter.

Mr Nimmo said: “It’s been a particularly challenging quarter for the UK’s energy sector, which is reeling from the recent spikes in wholesale gas, coal and electricity prices to unprecedented highs.

“Not only has this had an impact on energy-intensive industries such as manufacturing, but it’s also left the domestic energy supply market in disarray with 13 retail suppliers entering into a SOLR (supplier of last resort) process in the last eight weeks alone, impacting over 2 million customers who have been switched to new providers.

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