Corporate insolvencies in Scotland hit all time high

The number of businesses in Scotland going bust has hit an all-time high, according to statistics released today (Friday) by the Insolvency Service.

The number of corporate failures in Scotland in the year ending June 2011 was 1,365, the highest number of failures ever recorded and the equivalent of four companies a day hitting the wall.

The total number of Scottish companies failing on an annual basis has increased by 119% in the last four years.  In 2008, the number was 622.

Matt Henderson, Business Recovery and Insolvency Partner at Scottish accountancy firm, Johnston Carmichael commented;

“This makes for truly miserable reading, particularly today when we see the stock markets in global meltdown. 

“The statistics show that most of these companies went into liquidation and there has been a sharp increase in these appointments.  Liquidations tend to reflect the outcome of court action for the recovery of debt and often affect smaller companies.”

The hardest hit businesses are in those in real estate, construction, hotels, bars and retail and the prospects for these businesses remain very challenging in the coming period.

Matt Henderson continued;

“There are some indications that with improved business lending the number of businesses being saved could increase, but the markets are very jittery and that could cause further uncertainty in banking in the months ahead.”

THE KEY HIGHLIGHTS
• The total number of corporate failures in the quarter ended 30th June 2011 was 418, which is 18.1% up on the first quarter of 2011, and 12.4% up from the same quarter last year.

• Of the 1,365 failures, 1,096 were liquidation appointments and 269 were administration and receivership appointments.  in the same period which is a rise of 13.5%.  The rate of increase in Liquidations is therefore greater than the other types of insolvency appointments which are designed to save businesses. 

• Liquidations tend to reflect the outcome of court action for the recovery of debt and more often affect smaller companies.  It would appear from this information that it is smaller companies that are making up the bulk of the corporate insolvencies in Scotland.

• The sectors that have been affected most have been property companies, construction companies, bars, restaurants and retailers.  In this latest quarter the number of Scottish companies that went into Liquidation in these sectors were:-