By Ian McConnell
The number of larger corporate insolvencies in Scotland in the six months to June was less than half of that in the same period of 2020, prompting one expert to flag concern “in some quarters” about “an army of zombie companies”.
Interpath Advisory, formerly KPMG Restructuring, noted an “array of government Covid-19 support measures and a supportive lending community continued to help businesses trade their way through the pandemic”. It said analysis of notices in The Gazette revealed 18 Scottish companies fell into administration or receivership between January and June – down from 37 in the first half of 2020 and 39 in the opening six months of 2019. The numbers do not include liquidations. Interpath's focus on administrations or receiverships is aimed at measuring larger corporate insolvencies.
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Blair Nimmo, chief executive of Interpath Advisory, said: “The dichotomy of having historically low insolvency rates at a time of significant economic crisis is naturally prompting concern in some quarters that the taxpayer is propping up an army of zombie companies. But while it is fair to say that insolvencies are being suppressed artificially thanks to the raft of support available, we also know there are lots of good businesses out there whose balance sheets are broken solely due to the impact of the pandemic – so it is only right they continue to be given the time and the support to be able to build their way back out of the crisis.”
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Mr Nimmo noted insolvencies could begin rising again in the second half, with the furlough scheme and other support measures unwinding, but he does not envisage “the deluge of corporate failures across Scotland many have predicted”. He added: “I’m personally not so sure cases will escalate rapidly – all stakeholders, including banks and HMRC, continue to be pragmatic in their approach to companies experiencing difficulties as a consequence of the pandemic and there is lots of cash available from investors.”
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