How the troubled backdrop has pushed more Scottish firms to edge of collapse

The latest Red Flag Alert data from Begbies Traynor, which in Scotland has offices in Aberdeen, Dundee, Edinburgh, Glasgow, and Inverness, shows that in the second quarter of 2024 there were 30,435 businesses in Scotland in “significant” financial distress (showing deterioration in key financial ratios and indicators, including those measuring working capital, contingent liabilities, retained profits, and net worth). The figure represents an increase of 46.1 per cent year on year (higher than the UK-wide jump of 36.9 per cent) and almost 9 per cent quarter on quarter (about the same as at UK level). Across the UK, almost 602,000 businesses saw “significant” distress in Q2 2024.

Looking at more advanced, or “critical”, distress from April to June 2024, the report found that Scotland saw a 40.5 per cent increase from the first quarter of the year, with another 2,031 businesses suffering from this type of distress. In the UK as a whole, it rose by 1.1 per cent quarter on quarter and by 34.5 per cent year on year, with more than 40,600 businesses affected.

Ken Pattullo, managing partner for Begbies Traynor in Scotland, said: “Despite some encouraging signs of a return to growth in the UK economy, such as the slight rise in GDP in May, there’s no doubt that over the last few years businesses have battled a deluge of challenges, and, unfortunately, their cumulative effect is continuing to be felt, particularly by SMEs, with early-stage financial distress once again on the rise.”

In terms of early-stage distress across the sectors, in Scotland none of the 22 analysed saw a fall, and only one experienced year-on-year growth of fewer than double digits. The greatest increases year on year were in health and education (up by 68.8 per cent); bars and restaurants (up by 64.6 per cent); retail (up by 64.5 per cent); and food and drug retail (up by 60.8 per cent).

Pattullo added: “With the UK election now firmly behind us, many businesses are hoping for a more stable environment in which to consolidate, and plan for future growth. However, after seismic events from Brexit to Covid, plus further elections around the world and ongoing global conflict, the future is far from certain. In such a precarious scenario, we urge any owner-managers who see escalating financial problems to take the initiative and seek professional help at the first signs of trouble when experts will have more tools at their disposal to help these businesses get back on track.”

The Begbies Traynor figures come as Scotland’s insolvency service Accountant in Bankruptcy revealed that there were 109 company insolvencies registered in Scotland in June 2024, a 4 per cent year-on-year fall.