Scottish corporate failures fell during third quarter of 2018

Eileen Blackburn

The latest Accountant in Bankruptcy (AiB) figures show that 232 Scottish firms failed in Q3 2018 compared with 245 the previous quarter and rose by 3.6 per cent compared to the same quarter the previous year.

Eileen Blackburn, head of restructuring and debt advisory at accountants French Duncan LLP, said: “The fall in the number of corporate insolvencies in the third quarter is welcome but still at a relatively high level and means that we are on target to have almost 1,000 corporate failures this year which has not happened since 2012 (and has only happened in the three years of 2010, 2011 and 2012) indicating a trend of rising insolvencies and business collapse. There have already been 736 corporate failures this year when there were 780 for the whole of 2017.”

Ms Blackburn said that while general economic issues may be playing their part including uncertainty over Brexit, benign interest rates, and extremely low unemployment are not usually factors at play in such high failure rates. These figures reveal that certain sectors are suffering disproportionately as specific market changes impact upon them.

She added: “Construction, retail and casual dining already accounted for more than 40 per cent of all corporate failures in the first two quarters of this year and this highlights issues related to their specific markets as well as wider economic concerns. Lending to the construction sector is contracting while retailers and casual dining outlets are experiencing major shifts in consumer attitudes which have impacted seriously on these sectors resulting in many major closures.

“There are always periods when corporate failures rise and fall but this one is unusual. The last peak was in the years immediately after the financial crash when such outcomes were to be expected. But this time it is happening when interest rates are benign, when employment is at a 43-year high, and when the economy is growing albeit at a relatively slow rate. The concern is whether this highlights an underlying serious problem with the economy or whether it is simply a temporary blip as markets realign themselves and settle at their own level. The next few months will be telling but, in the meantime, I think that many more Scottish firms will go bust until greater stability can be established in the market.”