Insolvencies surge as firms lose battle for survival
Company insolvencies in Scotland rose by 17.9% last year as many business owners lost the battle to continue trading through the pandemic.
There were 704 liquidations and receiverships in 2021 compared with 597 in 2020.
Richard Bathgate, chairman of insolvency and restructuring trade body R3 in Scotland, said: “The annual increase in corporate insolvencies has been driven by the rise in creditors’ voluntary liquidations, which indicates that many directors are making the decision to close their businesses after struggling for more than 18 months to trade through the uncertainty of the pandemic.”
The ending of the furlough support scheme in September last year contributed to the 77% rise in corporate insolvencies in the three months October to December compared to the previous year.
“The furlough scheme provided critical support in retaining jobs and incomes. In January 2021 it was supporting almost 400,000 jobs in Scotland,” said Mr Bathgate.
“With that coming to an end in September 2021, along with the expiry of other support measures such as certain rates relief for Scottish retail, hospitality and leisure businesses and a range of state-backed loans, any businesses that were relying on government support would have had to make tough decisions about whether their company’s future was sustainable.
“The fall in annual personal insolvencies has been driven by a drop in Bankruptcies and Protected Trust Deeds. This reinforces the point that Government’s support measures have prevented the economic effects of the pandemic from translating into higher levels of personal insolvency by providing protection for those whose personal finances may have been hardest hit.
“However, the 7.5% Q3 quarterly increase in personal insolvencies suggests that people are starting to struggle now those measures have ended and we may see personal insolvencies increasing as 2022 goes on.”