The number of businesses in "critical" distress in Scotland has soared as the tough economic conditions begin to bite, the latest Red Flag Alert data from Begbies Traynor has revealed.
The latest figures from the business recovery firm show financial distress in Scotland has soared compared to other parts of the UK.
The data showed that for the three months to September 2022, there was a 112% increase in the number of businesses in ‘critical’ distress in Scotland compared to the same quarter in 2021. The figures also revealed a 37% rise since the second quarter of this year.
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Across the UK as a whole, this type of distress - referring to companies with financial problems including decrees of more than £5,000 filed against them - saw an annual increase of 25% and a quarterly increase of just 7%.
The Begbies Traynor figures also showed a rise in the number of firms displaying early or ‘significant’ distress, including having had decrees of less than £5,000 filed against them.
The new data shows that in the third quarter, more than 30,100 firms in Scotland displayed symptoms of this type of early stage distress.
In Scotland, the sectors which saw the sharpest year-on-year increase in ‘significant’ distress were real estate and property services (up 17%), wholesale (up 16%), and industrial transportation and logistics (up 10%). The foof and beverages, travel and tourism, and media sectors each saw an 8% rise in significant distress.
Just five sectors saw a year-on-year decline in "significant" distress - bars and restaurants, health and education, hotels and accommodation, printing and packaging, and sport and health clubs.
Ken Pattullo, managing partner for Begbies Traynor in Scotland, said: “With businesses continuing to face challenges including supply chain issues, soaring gas and electricity prices as well as shortages of raw materials and labour, economic prospects are bleak and there’s no real end in sight.
“Already, we are seeing the pressures of higher costs and falling consumer optimism weighing on businesses still reeling from the impact of the pandemic. In addition to coping with the fallout from the current cost of living crisis, many businesses are now facing the challenge of repaying debt such as the Government’s bounce back loans. It is particularly concerning to see such stark increases in levels of advanced distress here in Scotland, with the latest quarter showing levels four and a half times higher here than the rise seen across the UK as a whole.”
"With worry about spiraling energy costs, inflation and mortgage rates threatening to curtail household spending, confidence is falling among businesses too. We urge the country’s beleaguered small businesses to seek professional help as soon as possible to avoid their financial problems from escalating."
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