But with uncertainty in the air, no business should be complacent
Firms in Scotland have the lowest levels of insolvency risk of anywhere in the UK, according to research by insolvency and restructuring trade body R3.
R3’s insolvency risk tracker found that, in July, 21.8% of Scottish companies were at higher than normal risk of insolvency, against a UK average of 27.3%.
However, this is 1.6 percentage points higher than three months ago in April, when 20.2% of Scottish firms were found to be at higher than average risk of insolvency.
Looking at different sectors, R3 found that Scottish retailers have the second-lowest level of insolvency risk of all parts of the UK, at 22.9% (UK average: 24.6%). This is one percentage point higher than in April, when the figure was 21.9%.
Pubs and clubs in Scotland continued their record of strong performance, once again coming out as having the lowest risk of insolvency of anywhere in the UK (18.2%, with UK average 21.8%). Scottish hotels, meanwhile, did not come out as well, with 21.6% at greater than average risk, the fourth highest of the 12 UK regions, and against a UK-wide average of 20%.
36.9% of Scotland’s oil and gas extraction companies are at higher than usual risk of insolvency, underlining the volatility in the sector. July’s result is lower than June’s (37.3%), but higher than three months ago in April, when it stood at 36%.
Tim Cooper, Chair of R3 in Scotland and a partner at Addleshaw Goddard in Edinburgh, said: “The Scottish economy enjoyed a bounce in the first quarter of this year, with GDP up by 0.8% according to data from the Scottish government released in early July. The results from R3’s insolvency risk tracker appear to support the idea that this positive growth has continued into Q2, as we have the lowest overall increased level of insolvency risk of anywhere in the UK, which is great news.
“The retail sector is an important employer in Scotland, meaning that its relative stability is a relief. As for the good news about Scotland’s pubs, all I can say to that is cheers! Whisky is – after all – the UK’s largest food/drink export, and it seems many people still like to enjoy a dram in one of Scotland’s fine hostelries.
“The news from the hotel sector sounds a small warning bell, however, as tourism is a key plank in the Scottish economy. The slight worsening in the oil and gas extraction sector could be linked to this as well, as demand for hotel beds near refineries is largely driven by workers from this sector.
“Overall, July’s results show cause for some cheer, along with a strong dash of caution. With uncertainty in the air, no business should be complacent. The earlier expert advice is sought, the more opportunity there is to turn around a struggling firm, or to take pre-emptive action to avoid future troubles.”
The figures are from R3’s latest insolvency risk tracker. The tracker is compiled using Bureau van Dijk’s ‘Fame’ database and measures companies’ balances sheets, director track records and other information to work out their likelihood of survival over the next 12 months.