Business distress in Scotland soars by 80% as more firms plunge into financial trouble since June
Financial distress is increasing exponentially across Scotland’s economy with many industry sectors experiencing a substantial rise in the advanced signs of financial difficulties since the previous quarter, according to the latest research from Scotland’s leading independent insolvency and restructuring business advisory firm Begbies Traynor.
Published today (29 October 2020), the Red Flag Alert data from Begbies Traynor reveals that almost twice as many businesses in Scotland were experiencing ‘critical’ distress (which refers to businesses that have had winding up petitions or decrees totalling more than £5,000 against them) by the end of September than at the end of the second quarter of 2020 in June.
Looking at ‘significant’ distress, which indicates early signs of financial problems, year on year, almost 4,000 more Scottish businesses were in this type of distress, equating to a 15% increase, and affecting a total of more than 29,000 firms in the country. Across the UK as a whole, the data showed that ‘significant’ distress had grown by 14% since Q3 2019, with 557,000 businesses now in financial difficulties.
Despite the Government’s summer Eat Out to Help Out campaign, which saw more than 100 million subsidised meals sold during August, bars and restaurants remained one of the worst hit sectors. In Scotland, the number of bars and restaurants seeing ‘significant’ financial distress leapt by 15% year on year with a 6% rise since Q2 and over 1,300 hospitality businesses in trouble.
The popularity of ‘staycation’ holidays has also apparently failed to stem a tide of distress in the travel and tourism sector where businesses in ‘significant’ financial difficulty rose by 24% since Q3 2019; and hotels and accommodation saw a 15% uplift since the same period the previous year.
Scotland’s real estate and property services firms also continued to struggle, with a 23% increase in early distress in Q3 compared with the same period the previous year, and a 19% rise in this type of distress among construction businesses, representing a total of 7,100 businesses in those two sectors affected in Scotland.
Ken Pattullo, managing partner for Begbies Traynor in Scotland, said: “There are real fears that for many businesses, particularly in Scotland’s hospitality industry, any funding may come too late to save those that have suffered from the chronic lack of revenue brought about by the tough restrictions which came into force earlier this month such as the closing of pubs and curbs on households mixing indoors.
“Seeking professional advice is always the best course of action for any businesses that are struggling: there may be strategies that, if put in place now, could help to future-proof an organisation even in the face of the multi-faceted uncertainties of the Covid pandemic. This, together with the increasingly likely possibility that the UK will leave the EU without a trade deal, places businesses here and across the UK in a precarious situation.”
This was posted in Bdaily's Members' News section by Melanie Rice .