WYLIE & Bisset, Accountants and Business Advisers, has said that profitable businesses that suffered financially during the coronavirus pandemic are now being squeezed by a cost-of-living crisis which has led to a high level of Scottish insolvency activity.
The number of insolvency-related activities in Scotland has reached its highest level this year, according to new research from R3, the insolvency and restructuring trade body. Its analysis shows there were 122 Company insolvencies in Scotland last month.
Scotland saw the highest monthly rise in insolvency-related activity in the UK in April. Insolvency-related activity in Scotland was up year-on-year too, with April 2023’s figures 32.6% higher than those in April 2022.
Craig Allison, senior manager in Wylie & Bisset’s insolvency team, said: “What we’re seeing is profitable businesses, which suffered financially during the coronavirus pandemic, now being squeezed by a cost-of-living crisis.
“In scenarios like this many directors are using insolvency processes as a means to restructure their businesses which, if done properly, can save jobs and bolster the economy.”
According to Mr Allison, Scotland is seeing a slow, albeit choppy, increase in the number of corporate insolvencies, but not on the scale originally anticipated.
“That slow increase could be down to a number of factors – credit still seems to be readily available, so there’s potentially still a bit of robbing Peter to pay Paul as directors try to keep their companies afloat,” he said.
“HMRC pressure seems to be a precursor for a rise in insolvency and, up until the end of last year, HMRC has been fairly quiet when it comes to petitions for winding up (liquidation).
“However, since then, there has been a flurry of HMRC activity, so it makes sense that insolvency numbers are up, whether that be HMRC being directly responsible, or by directors seeking to take control of the situation and out of creditor’s hands.”
Wylie & Bisset’s advice to anyone worried about their business finances is to seek professional advice from a qualified source at the earliest opportunity.