By Ian McConnell

THE number of company failures in Scotland last year was down 40 per cent on 2019, with major government support amid the coronavirus crisis cited as the main reason by insolvency trade body R3.

But R3 warned the picture was “far from rosy” for Scottish companies, particularly those in sectors most affected by the pandemic.

Tim Cooper, who chairs R3 in Scotland, said; “The question of what will happen when current protections expire, and the usual triggers for corporate insolvencies resume, is one that should concern us all.”

Figures yesterday from the Accountant in Bankruptcy show the number of company liquidations totalled 592 in 2020. R3 noted there had been 981 corporate insolvencies in 2019 in the AiB figures, which do not include administrations. The number of corporate insolvencies in the fourth quarter of 2020, at 132, although up 15% on the previous three months, was down 42% on the same period of 2019.

Mr Cooper declared 2020 had been “a year like no other in living memory”.

He said: “The pandemic upended many normal ways of living and doing business, and took a terrible toll on our communities. Against this background, it is no surprise the economy has suffered, with Scotland’s GDP (gross domestic product) in November 7.1% below the level in February 2020. But it may come as some surprise to many to find that both corporate and personal insolvencies in 2020 were far lower than in 2019, in contrast to an underlying trend in recent years towards annual growth in insolvency numbers.”

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Mr Cooper added that lower levels of company liquidations “can mainly be attributed to the support provided to companies by the [UK] Government in the form of the furlough scheme, various types of state-backed loans... [and] the ability to defer VAT”. He also cited the beneficial impact of “rates relief for Scottish retail, hospitality and leisure businesses, and the suspension of commercial evictions and winding-up petitions”.

Mr Cooper said: “In addition, creditors such as banks and finance companies have voluntarily shown high levels of forbearance, as they have recognised the need to work with their clients, to secure the best possible outcome for all parties. This is to be welcomed.”

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However, he added: "It is clear that all is far from rosy for Scottish companies, especially those in sectors hardest-hit by the pandemic, and the changes it brought to everyday life. A retailer might be able to expand its online offering, for example, but a hotel room cannot be enjoyed through a screen.

"Our energy sector has been hard-hit by the collapse in demand for oil and gas, which has a knock-on effect in nearby communities in the north-east where the industry is concentrated."