Corporate insolvencies - liquidations and receiverships - in Scotland during the third quarter of 2022 increased by 13.3% year-on-year.
The latest Accountancy in Bankruptcy (AiB) register data also showed that personal insolvency numbers - bankruptcies and protected trust deeds - in Scotland decreased by 4.9% year-on-year.
The quarterly and yearly rise in corporate insolvencies was largely driven by an increase in compulsory liquidations, which have increased by 72% from the same time last year.
Richard Bathgate, chair of insolvency trade body R3 in Scotland, and a restructuring partner at Johnston Carmichael, commented: “This suggests that companies across the supply chain are feeling the pinch and that creditors are now prepared to take the legal route to recover the debts they are owed, perhaps in order to pay their own bills and satisfy their own creditors.
“It’s been a volatile couple of years, but we aren’t out of the woods yet - as we move into 2023, firms need to consider their situation, prepare for what’s on the horizon and act if they run into cashflow problems, issues with paying staff, rent or taxes, or see their stock start to pile up. “
As for personal insolvency, the quarterly and yearly fall was driven by a drop in all forms of personal insolvency processes - with bankruptcies falling 10% from last year.
“This suggests that the cost-of-living crisis has yet to translate into an increase in personal insolvencies, but despite the fall in numbers, rising food prices, rent and mortgage costs are still huge pain points for people in Scotland who are finding themselves paying significantly more each month on just the everyday essentials,“ explained Bathgate.
“There’s a real danger that people will begin to turn to credit options to cover these rising cost pressures, and that we’ll see more and more people driven into problem debt, and more vulnerable to the kind of unexpected shocks that can lead them to become insolvent.”
Steven Jansch, head of insolvency at Gilson Gray, said: “What is interesting to see, is that creditor pressure has yet to return to pre-pandemic levels – although year-on-year levels of compulsory liquidations have increased, this is still lower than what was typical during 2019-2020.
“While it is good to see that overall numbers of insolvencies are returning to a ‘healthy’ pre-pandemic level - meaning that some directors are properly dealing with longer term business issues - the rise in compulsory liquidations is a sign that there is more to come.
“Good quality, regularly updated and stress-tested management information is crucial for the long-term survival of any business.”
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