As costs bite...

Calls for more help as insolvencies head for record

locked gate
Firms are closing as a result of rising costs

Company insolvencies could hit a record this year, prompting further pressure on the Chancellor and the Scottish Government to take action to ease rising costs and stimulate growth.

There were 99 company insolvencies registered in Scotland last month, 21% higher than the number in October 2022.

This comprised 35 compulsory liquidations, 58 CVLs, four administrations and two CVAs. There were no receivership appointments.

In England and Wales there were 20,865 insolvencies between January and October, compared to 17,175 in the whole of 2019 and 22,128 in 2022. Insolvencies were 18% higher in October than in the same month last year (2,315 against 1,954).

Matthew Richards, restructuring partner with Azets, said: “There have been significantly more administrations in 2023 compared to 2019-2022, as larger businesses are using administrations to rescue parts of the business that are being impacted by higher interest rates and inflationary pressures.

“As we head into the Christmas period, the pressure on construction and real estate business will persist and we expect that insolvency numbers will continue to remain at current levels.

“Insolvency numbers will probably increase further in 2024, particularly in the hospitality, retail, and leisure sectors if consumers continue to curb their spending to cope with higher mortgage and rent payments. The increase in UK unemployment may also impact this further.”

Michelle Elliot, restructuring advisory partner at FRP in Glasgow, said: “Insolvency levels have jumped up again after last month’s slight respite – a reflection of the severity of the challenges that businesses across the country continue to face

“Firms are having to stomach an unwelcome cocktail of long-standing debt, rising interest rates, sticky inflation and weakened customer demand. In some sectors the pressures are reaching critical levels.

“Just before the weekend we saw industry representatives for Scottish hospitality call out for more government support in the face of what it described as a ‘crisis’.

Historically, the volume of company insolvencies registered in Scotland has been driven by compulsory liquidations.

However, during the coronavirus pandemic, around three times as many CVLs as compulsory liquidations were registered. In the first ten months of 2023, CVL numbers remained more than 1.5 times higher than compulsory liquidation numbers.

Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.