Scottish business insolvencies rise by 10.6%

Business insolvency levels rose by 10.6% year-on-year in Scotland in Quarter 2 according to new statistics from Accountant in Bankruptcy to a total of 313.

Iain Fraser, Chair of the Scottish Technical Committee at R3, the UK’s insolvency and restructuring trade body, and a Partner at FRP Advisory, said: “Despite the increase in corporate insolvencies, Scotland’s economy has shown some resilience of late – with the most recent figures showing a GDP growth of 0.3% in July 2024. This growth has mainly been driven by the manufacturing sector and information and communication services, along with a boost in consumer spending from major summer events such as the Euros and the Fringe Festival.

“Inflation has dropped considerably to 1.7%, and this feels a world away from the eye-wateringly high figures we were grappling with one and two years ago. This is a clear indication of just how far we have come in stabilising the economy after a challenging few years. However, there is still some way to go, as many businesses continue to feel the lingering effects of high costs.

“With unemployment in Scotland falling below the UK average, interest rates falling and inflation easing, there are reasons to be optimistic. However, there is an air of uncertainty for businesses as the Autumn Budget approaches at the end of this month. Directors and business owners will likely be looking to the upcoming Budget and to the Scottish Government for clarity before they make any big decisions about the future of their businesses.

“Whilst Scotland’s economy has shown resilience, it would seem Scotland’s economic upturn has come too late for a number of businesses as the increase in Creditors’ Voluntary Liquidations has driven corporate insolvency levels in Scotland to their highest levels since Q4 22-23. After years of battling high costs and cautious consumer spending, an increasing number of directors are turning to an insolvency process to help resolve their financial issues.

“From a solvent perspective, Members’ Voluntary Liquidations (MVLs) have also increased to their highest figure since Q1 23-24, and this suggests there has been a rise in the number of solvent businesses shutting. This is perhaps due to director fatigue after four years of economic turbulence and the effect this has on the business climate, or directors taking action to reorganise their businesses ahead any potential tax changes in the Budget later this month.”