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Insolvency rates close to record

AROUND 25 companies went bust every week in Scotland on the official measure last year, when the level of failures remained close to the record set in 2011.

Figures compiled by the Accountant in Bankruptcy show 1264 companies failed in 2012 as the economic downturn took a heavy toll on sectors like retail, hospitality and construction.

The total number of firms recorded in the register of insolvencies last year was down just 1% on the record 1278 seen in 2011. Following the high profile collapse of firms like Comet and Jessops in recent weeks, the figures prompted a warning from a business recovery specialist that there may be no let-up in the failure rate this year.

"Unfortunately, the situation is unlikely to get much better in the coming year as the threat of a triple-dip recession looms large and there seems little easing in trading conditions for business," said Bryan Jackson, corporate recovery partner at PKF.

News last week that UK gross domestic product fell by 0.3% in the last three months of 2012 sparked fears the country could enter a triple dip recession.

The Scottish Government will publish figures for GDP in Scotland in the three months to September tomorrow.

PKF played down the significance of a one-third fall in insolvencies in the final quarter of 2012.

The Accountant in Bankruptcy said 185 companies went into receivership or into compulsory or creditors voluntary liquidation in the quarter. That compares with 274 in the third quarter and 280 in the last three months of 2011.

"The bulk of this was due to a fall in liquidations which may be accounted for by a reduction in activity from HMRC in initiating insolvency proceedings," said PKF. "HMRC is a major player in initiating insolvency actions yet they seemed to dramatically reduce their activities from November onwards which could account for the large drop in numbers in the final months of 2012."

Graeme Henry, head of corporate restructuring at law firm HBJ Gateley, said the fall in insolvencies likely reflects banks and other creditors trying to support businesses in the hope that they can survive the downturn.

But KPMG delivered a more optimistic assessment of developments in 2012 earlier this month.

The accountancy giant calculated the number of firms going bust during the year fell for the first time since 2008.

KPMG said there were 1200 corporate insolvency appointments in 2012, compared with 1277 in 2012.

The KPMG figures include 141 businesses entering administration in 2012, down from 187 in 2011.

Administration is short of liquidation.

Blair Nimmo, head of restructuring for KMPG in Scotland, noted then many companies had become used to adapting to cope with tough economic conditions.

Mr Nimmo said the fall in the number of failures was not significant enough to suggest the challenges posed by the global economic climate had been overcome. However, he said the second half of 2012 was quieter for corporate insolvencies.

The Accountant in Bankruptcy said a record 420 companies failed in the quarter to June. It recorded 274 failures in the quarter to September.

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