Insolvencies surge 31% in Scotland: Experts warn thousands of SMEs could cut costs—but don’t
A 31% year-on-year surge in business insolvencies across Scotland has prompted warnings from industry experts, who say that too many small firms are overlooking easy wins when it comes to cutting costs.
According to the latest figures released by the Insolvency Service, 105 Scottish companies became insolvent in March 2025, compared to 80 in the same month last year. Sectors hit hardest include hospitality, construction, and retail—industries already battling with inflation, higher borrowing costs, and wage pressures.
But while many SMEs are focusing on growth and resilience strategies, financial analysts say that recurring fixed costs like insurance premiums, utilities, and contracts are still being overlooked—despite being among the easiest areas to make meaningful savings.
“In survival mode, small business owners tend to prioritise sales and staffing—but what’s often missed is the cost creep of everyday services,” said Chris Richards, founder and managing director of SimplyQuote, a UK-based insurance and financial comparison firm.
“We routinely see businesses paying 15 to 40 percent more than they need to for basic cover, simply because renewals get auto-approved or price comparisons seem like admin they don’t have time for. But if insolvency is looming, every margin matters.”
Recent reports from the Federation of Small Businesses (FSB) show that over 60% of SMEs do not shop around when renewing their insurance policies, instead rolling over with the same provider year after year. While reforms in the energy and telecoms sector have driven more proactive switching, business insurance remains a blind spot.
Insolvency experts warn that the psychological barrier of “too busy to save” could be costing firms their survival. While rising interest rates and supply chain costs have dominated headlines, hidden inefficiencies in procurement and overheads are becoming a silent killer for firms with tight cashflow.
Meanwhile, regional business development groups are calling for stronger advisory support for SMEs, including clearer guidance on renegotiating contracts and avoiding “cost complacency.”
Scotland’s business community has shown resilience in the face of post-pandemic challenges, but analysts suggest that without a shift in how fixed costs are approached, insolvency rates could remain elevated well into the second half of 2025.
“This isn’t about penny-pinching,” added Richards. “It’s about operational discipline. The firms that scrutinise their outgoings now are the ones still standing six months from now.”