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Scottish insolvencies jump 36% 24 July 2014

The number of Scottish corporate failures has increased 35.9% year-on-year during Q2 2014.

Figures from the latest Accountancy in Bankruptcy report show total corporate insolvencies rose from 184 in Q2 2013 to 250 in Q2 2014, an increase of 2.4% from the first quarter of 2014.

The total figure consisted of 188 compulsory liquidations (an increase of 82.5% year-on-year) and 62 Creditors Voluntary Liquidations (down 22.5% year-on-year), with no receiverships recorded.

Bryan Jackson, restructuring partner at accountancy and business advisory firm BDO, said the level of rising corporate failure is an unwelcome trend, especially for small businesses.

Jackson said: “Many of these companies are fairly small and may even be shell companies for businesses that formerly existed but have now been wound up.

“With the economic recovery beginning to take hold it remains to be seen how many businesses have ensured that they are financially secure enough to cope with increased interest rate rises, both in terms of rising costs for themselves and the impact it will have on consumer confidence and spending. In addition, with the Eurozone experiencing a more limited recovery than the UK, the growth prospects of businesses dependent upon such markets could be hampered.

“Although there are many positive signs in the economy there are still concerns that some sectors are experiencing patchy growth. Housebuilding, for example, is on something of a rollercoaster from the very low point of the last few years to some peaks funded by central government lending.

“Flexibility is essential and businesses need to act now to cover their future costs rather than wait until debt has been incurred and then try to return to financial stability.”

There was a 2% decrease in the number of Scottish personal insolvencies during Q2 2014, falling from 3,029 in Q1 2014 to 2,968 in Q2 2014.

The figures show more Scots are using debt payment programmes approved under the Scottish Government Debt Arrangement Scheme (DAS).

Minister for Energy, Enterprise and Tourism, Fergus Ewing, said: “It is gratifying to see an increased uptake on the DAS debt payment programme this quarter. This highlights that DAS has opened up a whole new avenue for debtors battling financial difficulties. The continued reduction in personal insolvencies is also very welcome.

“A total of £8.6m has been repaid through DAS this quarter. This figure is particularly encouraging as the Scottish government continues to work towards creating ‘Scotland’s Financial Health Service’, with DAS being one of the first building blocks towards creating that.

“This demonstrates that Scotland is capable of administering personal insolvency to ensure that the needs of creditors and businesses is balanced with the needs of debtors. We can ensure that those burdened with debt can access the debt relief they need and those who are able to pay, do so.”



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