NEW corporate insolvency statistics from accountancy firm KPMG show a marked increase in the number of businesses failing in Scotland during the first quarter of 2016.
Between January and March this year, total insolvency appointments rose by 10 per cent from 188 to 206 compared to the same three months in 2015. The increase is mirrored in both liquidation appointments – which tend to affect smaller businesses – up 9 per cent – and administrations – which usually involve larger organisations – up 10 per cent.
But compared with the previous three month period between October and December 2015, total insolvency appointments have fallen by a quarter from 275 to 206. Similarly, liquidations fell by 23 per cent to 184 and administrations dropped 39 per cent to 22.
“The latest insolvency statistics are to some extent confusing – up on last year, down on the previous three months – which largely reflects our own experience,” said KPMG’s head of restructuring, Blair Nimmo. “We appear to have moved from cautiously optimistic to just cautious. While much of our activity has been focused on oil and gas and related businesses suffering from the knock-on impact, this has not yet and may well never manifest itself in a significant increase in insolvencies.”
Mr Nimmo said the number of failing businesses now was still significantly lower than at the height of the recession, but the figures were beginning to creep back up.
“The oil and gas downturn, coupled with an impending EU referendum and Scottish elections, have created a period of uncertainty, which inevitably results in unfavourable trading conditions,” he said. “Changes to the minimum wage will also put additional pressure on businesses as they seek to implement the new National Living Wage rate.”
With those challenges in mind, companies should continue to look at consolidating operations and making efficiency improvements to avoid stress or distress.
“Cash management and cost reduction continue to be important whilst we are working with a cross section of businesses in terms of geography, size and sector developing contingency plans, assisting with refinancing and with their interaction with all stakeholders,” Mr Nimmo said. “We are undoubtedly busier than we were at the tail end of last year.”
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