Cost pressures

Scots insolvencies rise as England & Wales see fall

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Company failures have risen

Company insolvencies in Scotland soared by 22% in May compared to the same month last year, while the number in England and Wales fell by 21%.

There were 118 company insolvencies in Scotland made up of 71 CVLs, 43 compulsory liquidations and four administrations. There were no CVAs and no receivership appointments.

The total was also higher than both during and before the COVID-19 pandemic, according to the Accountant in Bankruptcy, Scotland’s Insolvency Service.

Michelle Elliot, restructuring advisory partner at FRP in Glasgow, said: “While Scottish business confidence is strengthening, this data reflects the fact that these are still challenging and volatile trading conditions.

“Economic growth has flatlined again after a positive couple of months, and firms are still paying the price of high interest rates, which may very well be held again when the Bank of England meets on Thursday.

“While we expect that overall insolvency levels will start to stabilise this year, we could still see levels rise further in the immediate future.”

New regulations on pre-pack insolvencies are said to have complicated the insolvency procedure and pushed up professional costs, while the re-introduction of preferential status for HMRC has increased the hurdle to get rescue procedures completed and may have frustrated many rescue attempts.

Shamil Malde at FTI Consulting, said: “There has been speculation around whether Labour’s proposals to charge VAT on private schools and to tax North Sea oil could drive up sectoral insolvencies.

“Similarly, the Tories’ pledge to control migration could be a cause of concern for dependent sectors, such as healthcare, higher education and agriculture.

“It will be interesting to see which policies come into fruition after the election and what impact these may have on insolvencies from August’s statistics to the end of the year.”

Jeremy Whiteson, restructuring and insolvency partner at Fladgate, said: “At a time when there is so much talk of economic growth, turnaround of troubled but viable business should, in our view be a higher priority.”

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