Scotland’s businesses are still suffering from a “Covid hangover” with new figures showing the number of firms becoming insolvent has reached an 11-year high.
Corporate insolvencies rose to 1,132 in 2022-23, with this up by almost a third (32.6%) on the previous year, new figures from the Accountant in Bankruptcy showed.
The 2022-23 total is nearly a fifth (19.4%) higher than pre-pandemic, with 948 insolvencies recorded in 2019-20 – with an expert warning a “further wave of insolvencies is inevitable” unless economic circumstances improve “drastically”.
The statistics also showed a rise in personal insolvencies to 8,004 in 2022-23 – with this up by 3% on the previous year’s total.
However, personal insolvencies - which includes those who go bankrupt as well as people taking out a protected trust deed - were significantly lower than pre-pandemic levels.
The 2022-23 total is down by two-fifths (40.7%) from the 13,491 personal insolvencies in 2019-20.
Richard Bathgate, chair of the insolvency and restructuring trade body R3 in Scotland, said: “The Covid hangover continues to hit Scotland’s businesses hard, with the figures published today showing that corporate insolvency numbers are at their highest level in a decade.
“The figures released today go beyond simply levelling out pre-Covid insolvencies, with labour, stock and energy expenses all surging, even previously successful businesses are now turning to an insolvency process to resolve their financial difficulties.“
Bathgate said rising numbers of voluntary liquidations among firms indicated that “more and more company directors are choosing to close their businesses before that choice is taken away from them”, adding: “Businesses who made it through the pandemic with support from the government are considering whether the debt they’ve taken on is sustainable.
“Though the economy has shown some unexpected resilience so far this year, with a record low of unemployment levels and rising business confidence, I think a further wave of insolvencies is inevitable in 2023 unless the picture drastically improves.”
He stressed it had been a “tough year for individuals in Scotland”, with a rise in people resorting to bankruptcies and protected trust deeds.
Don't miss the latest headlines with our twice-daily newsletter - sign up here for free.
