MANY Scottish firms are likely to go bust amid uncertainty about the outlook for the economy following a surge in business failures last year, experts have warned.

Official figures published yesterday show the number of business entering liquidation increased 21 per cent last year to a six year high of 945, from 780 in 2017.

Restructuring specialists said the increase reflected the ‘domino effect’ of the oil and gas downturn on sectors such as hospitality combined with pressures on consumer spending.

Read more: Jobs go as oil and gas downturn claims Aberdeen hotel

With uncertainty about Brexit weighing on confidence and prompting some firms to stockpile, the challenges facing firms may be set to intensify.

Noting the number of corporate insolvencies in 2018 was the highest since 2012 and the fourth highest ever, Eileen Blackburn of French Duncan accountants warned: “I think that many more Scottish firms will go bust until greater stability can be established in the Scottish economy.”

Ms Blackburn said the increase in insolvencies last year was a great concern noting that it occurred despite interest rates and unemployment sitting at or close to record lows.

Read more: 26 redundant as plumber goes into liquidation

She noted the continuing impact of uncertainty over Brexit and the consequent fall in investment. This has been compounded by the shift in consumer spending online, which has weighed on high street retailers.

Highlighting continuing confusion over the UK’s future relationship with Europe, she said firms with close economic ties to the EU or who rely heavily on European staff in areas such as hospitality, retail, and agriculture will be under pressure.

Tim Cooper, chair of the R3 insolvency and restructuring trade body in Scotland, said while the increase in liquidations last year was concerning, the figures may not show the whole picture. They do not include firms entering administration or agreeing company voluntary arrangements with creditors.

Read more: Hotel in Scottish village pushed into administration by oil sector woe

“In general, R3’s members in Scotland are reporting increased activity, across a variety of sectors,” said Mr Cooper. “This indicates that market conditions are bubbling and problems are rising to the surface, with more business, creditors and individuals turning to restructuring and insolvency professionals.”

Mr Cooper said some firms had been stockpiling materials in response to the uncertainty around how, when, and under what terms the UK will leave the European Union, adding to pressure on cash flow. Many investment decisions have been deferred.

He noted that consumer confidence in Scotland had been firmly in negative territory all last year, during which the number of personal insolvencies increased by 14%, to 12,025, from 10,585 in 2017.

“Companies which are counting on consumer spending to at least match previous levels may well find themselves counting the costs of this approach,” cautioned Mr Cooper.

He added: “In the North East, the oil and gas sector downturn has had a noticeable ‘domino effect’, triggering insolvencies for businesses which rely on the extraction sector, especially in the hospitality sector.”

While the partial recovery in the crude price since late 2016 has provided a boost for the oil and gas industry the impact of the downturn from 2014 to 2017 is still being felt.

Earlier this month the Highland Hotel in Aberdeen closed with the loss of 20 jobs. Brian Milne, a restructuring partner with French Duncan said then that the business had been having problems for some time due to the downturn in the oil industry in the Granite City, which it was heavily dependent upon.

The White Horse Inn, at Balmedie, north of Aberdeen went into administration last week. The 26 employees of the business were retained as administrators from FRP Advisory sought a buyer for it.

The number of insolvencies rose in Scotland amid the recession triggered by the financial crisis of 2008, peaking at 1,278 in 2011. There were 1,264 corporate insolvencies in 2012.