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Insolvency rate falls for the first time in four years

THE number of firms going bust in Scotland fell for the first time in four years in 2012 according to KPMG, in an apparent sign businesses have got used to coping with tough trading conditions.

However, Blair Nimmo, head of restructuring at the big four accountant in Scotland, said firms will need to stay in defensive mode as the economic climate is likely to remain challenging.

Figures compiled by KPMG show the number of Scottish corporate insolvency appointments fell by 6% in 2012, to 1200 from 1277 in the preceding year.

The fall followed three annual rises in a row in insolvency numbers since 2008, when 803 businesses entered liquidation, administration or receivership.

With the annual fall largely driven by a 27% drop in the number of insolvencies in the final quarter, to 237 compared with 324 in the same period of 2012, Mr Nimmo said the figures represent an "element of good news".

He suggested the drop in insolvencies may reflect the fact companies have adapted to the tough conditions many have faced since 2008, rather than waiting for a return to the boom conditions they enjoyed before the downturn that started in that year.

Mr Nimmo said: "Those companies have become adept at 'fighting the fight' and adapting their operations to cope with tough economic conditions."

Noting a slowdown in the rate of failures in the second half of 2012, Mr Nimmo said reports of high-profile retail failures (such as Comet) may have created the impression things are worse than they are.

However, he added: "The reduction is not significant enough to indicate the many challenges posed by the current global economic climate have been completely overcome."

Mr Nimmo advised companies to keep a tight leash on costs and to watch their cash at all times. He predicted: "Having got this far through five difficult years many Scottish businesses will now hope to survive until growth returns to the economy but until that time we will continue to see very little speculative investment or transactional activity."

Last week PKF accountants predicted the number of personal bankruptcies in Scotland would remain steady at around 20,000 in 2013, compared with the peak of 23,541 in 2009.

KPMG recorded 1059 liquidation appointments in 2012, compared with 1102 in 2011 and 662 in 2008.

The firm said there were 141 administration and receivership appointments in 2012 and 2008, compared with 188 in 2011.

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