The number of business bankruptcies in Scotland increased by 80.3% between July and September of this year, compared to the same period last year.
Insolvency and restructuring body R3 found that the number of liquidations and receiverships in Scotland increased by 29.4% to 211 from July to September, compared to April to June.
At the same time, voluntary liquidations of creditors rose to 179 from July to September – an increase of 35.6% on the 132 recorded from April to June – and 159.4% on the figure of 69 from June to September 2020 .
The number of personal insolvencies – bankruptcies and protected trust deeds – in Scotland rose 1.8% to 1,918 from July to September, from 1,885 from April to June, while being 8.4% higher than in July to September 2020, at 1,770.
Tim Cooper, president of R3 in Scotland and partner at Addleshaw Goddard, explained that the quarterly and annual increase in business bankruptcies has been driven by an increase in voluntary liquidations of creditors, suggesting that company directors are choosing to shut down their businesses, having deemed future success unlikely after negotiating for more than a year and a half during a pandemic.
‘The numbers reflect the difficult three months the Scottish business world has experienced – restrictions were lifted in August, but it took a long time for trade to pick up and it will be some time before it returns to levels before the pandemic.
“Businesses have also faced supply chain disruptions, and international trade has been affected both by the pandemic and by the evolution of our relationship with the EU. ”
Cooper added, “On personal insolvency, the quarterly and annual increases have been driven by an increase in protected trust deeds, which suggests that more people are working with their creditors to resolve and repay their debts, without return to bankruptcy – and is supported by the fact that the number of bankruptcies in Scotland has declined compared to the previous quarter and around the same time last year.
“It should also be noted that the number of people entering a moratorium in Scotland increased significantly this quarter, indicating that there has been a significant increase in the number of people facing or approaching serious financial hardship.”
Interpath Advisory’s analysis confirmed R3’s findings, also blaming the unwinding of government support measures, as well as rising inflation and pressures on the supply chain.
Analysis of notices published in The Gazette by the restructuring firm revealed that a total of 14 companies went into receivership or receivership from July to September – up from 10 in the second quarter, and also up from 10 appointments recorded during the same period last year.
UK administrations and receiverships grew 26% in the third quarter of 2021 – from 123 in the second quarter in 2021 to 155 in the third quarter – although this was down considerably from the 243 appointments in the comparative period in 2020, and still only 39% of pre-pandemic levels from 401 appointments in Q3 2019.
In the UK, the construction and energy sectors saw the largest increase in levels of administration and turnarounds in the third quarter, with three times more bankruptcy filings in the energy sector (nine appointments) and twice as many deposits in the construction sector (34 appointments) compared to the previous quarter.
Blair Nimmo, Managing Director of Interpath Advisory, commented: “This has been a particularly difficult quarter for the UK energy sector, which is reeling from recent spikes in wholesale gas, coal and gas prices. electricity to unprecedented heights.
“The reality is that with price caps restricting the ability of companies to pass rising input costs on to consumers, there is little room for maneuver for small providers who do not have the financial bandwidth to absorb. the higher price, leaving many with little option but to enter insolvency proceedings.
“More broadly, with no end in view of this price volatility, effective business planning is now essential, and energy-intensive companies in particular will need to quickly and carefully consider the impacts of cost inflation and develop mitigation strategies.”
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