Businesses in Scotland saw a dramatic uplift in instances of advanced financial distress in the final quarter of 2021 as the emergence of the Omicron variant hampered growth for those already impacted by two years of pandemic disruption.
According to the latest Red Flag Alert published today by Begbies Traynor, businesses in Scotland suffered a 10 per cent rise in ‘critical’ distress between the third and fourth quarters of last year. This was markedly higher than the rest of the UK which experienced an increase of just 1%.
However, compared to the same period a year earlier, levels of critical distress - those that have had winding up petitions or decrees totalling more than £5,000 against them - in Scotland fell by 33%. This compared with a 7% increase across the UK as a whole.
Similarly, levels of early-stage or ‘significant’ distress in both Scotland and across the UK grew quarter-on-quarter at the end of 2021, but fell on an annual basis.
“Since the outbreak of the pandemic in spring 2020, businesses have been on a roller coaster ride," said Ken Pattullo, partner for Begbies Traynor in Scotland.
"From complete lockdowns to ever-changing Covid restrictions or coping with spiraling demand amid global supply chain disruption and labour shortages, they have faced a tidal wave of challenges, all of which have heightened uncertainty and made planning and forecasting almost impossible. In this climate, it is no surprise that advanced financial distress is continuing to escalate for many businesses and it is particularly worrying that the situation appears to be more severe in Scotland.”
In Scotland, almost all sectors saw a rise in significant distress since the previous quarter with utilities (up 10%) and travel and tourism, food and beverages and wholesale (all seeing a 9% uplift) among the worst hit. No sectors in the country experienced a quarter-on-quarter fall in early distress.
“While 2021 saw some signs of economic growth, we were once again put firmly on the backfoot with the emergence of the Omicron variant in the last quarter devastating the normally busy Christmas season for many sectors with consumers rapidly curtailing their festive plans and businesses struggling with staff absenteeism as the UK reeled from a record number of infections," Mr Pattullo said.
“Unfortunately, looking at the year ahead, we are also faced with the likelihood of rising prices and inflation as energy costs increase dramatically, squeezing both businesses and consumers. With the government resisting calls to provide more help for firms struggling since the latest outbreak, together with the withdrawal of pandemic support and tax rises, there are still tough times ahead and directors would be well-advised to seek professional advice at the first signs of financial distress.”
Whisky giant Diageo posts profit rise as drinkers return to the bar
Drinks giant Diageo has hailed the performance of luxury whisky brand Johnnie Walker and its wider Scotch portfolio as it reported a big rise in first-half profits, powered by the reopening of the on-trade in the key markets of Europe and North America.
Scotland’s biggest Scotch whisky distiller booked a 22.5 per cent rise in reported operating profit to £2.7 billion for the six months ended December 31, ahead of forecasts. It sent shares up 91p, or 2.5%, to 3735.5p.
EasyJet lifted by testing boost as airline cuts first-quarter losses
The boss of easyJet has flagged the airline’s view that Covid testing for travel across its network “should soon become a thing of the past” as it reported a jump in bookings following this week’s move by the Scottish and UK governments to remove travel restrictions for fully vaccinated people arriving in the country.
But the budget airline, which employs about 560 people in cabin crew and pilot roles across Scotland, warned the Omicron variant would continue to have an impact on short-term performance in the second quarter.
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