By Ian McConnell
SCOTTISH corporate insolvencies in the fourth quarter of last year were up 77 per cent on the final three months of 2020, with one expert seeing signs many directors are deciding to close businesses after struggling through pandemic-related uncertainty.
There were 239 corporate insolvencies between October and December 2021, compared with 135 in the same period of the previous year, according to official figures from the Accountant in Bankruptcy published yesterday. This year-on-year increase was driven by a surge in the number of creditors’ voluntary liquidations, which totalled 189 in the fourth quarter of last year but only 88 in the final three months of 2020. Compulsory liquidations totalled 50 between October and December 2021, only slightly higher than the figure of 47 for the same period of the previous year. The AiB insolvency figures do not include administrations.
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Richard Bathgate, who chairs insolvency and restructuring trade body R3 in Scotland and is a partner at accountancy firm Johnston Carmichael, said: “The annual increase in corporate insolvencies has been driven by the rise in creditors’ voluntary liquidations, which indicates that many directors are making the decision to close their businesses after struggling for more than 18 months to trade through the uncertainty of the pandemic. One factor that will have played into the rise in corporate insolvencies was the ending of government Covid support measures.”
He added: “The furlough scheme provided critical support in retaining jobs and incomes. In January 2021 it was supporting almost 400,000 jobs in Scotland. With that coming to an end in September 2021, along with the expiry of other support measures such as certain rates relief for Scottish retail, hospitality and leisure businesses and a range of state-backed loans, any businesses that were relying on government support would have had to make tough decisions about whether their company’s future was sustainable.”
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Mr Bathgate also noted the Omicron coronavirus variant wave had led this winter to the reintroduction of some restrictions in Scotland, observing this “will have particularly affected the hospitality sector during what is typically a busy time of year”.
He said: “Uncertainty around the Omicron variant meant consumer spending remained relatively low this Christmas, particularly compared to last winter, and as a result many businesses missed out on the boost in income the festive period usually brings.”
The number of corporate insolvencies in Scotland in the fourth quarter was up by 13.3% on the figure of 211 for the preceding three months, the AiB figures show. R3 noted corporate insolvencies in Scotland over 2021 as a whole were, at 704, up by 17.9% from 597 in the prior year.
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