The number of Scottish firms that are “pushed to the brink of failure” has increased significantly.
Challenging economic conditions “continue to bite” businesses across sectors in Scotland, new figures reveal.
Businesses in Scotland, along with many others across UK, saw a rise in early signs of financial distress in the third quarter of 2024 compared with the same period the previous year, according to the latest Red Flag Alert data from Begbies Traynor.
The research, which provides a snapshot of corporate health, reveals that in the third quarter of 2024, there was a 37.2 per cent increase in levels of businesses in Scotland suffering from “significant” financial distress compared with the third quarter last year.
The firm said this type of distress, which refers to deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth, impacted 31,338 businesses in the country.
Looking at the picture in Scotland quarter-on-quarter, there was a less severe rise of just under three per cent when compared with the second quarter.
The trends in Scotland are broadly in line with the UK-wide figures which showed a 32.3 per cent increase in significant distress since the third quarter of the previous year, while levels had risen by 5.1 per cent compared with the last quarter. Across the UK, 632,756 businesses experienced significant distress in the third qaurter.
The steady increase in Scottish companies experiencing ‘significant’ financial distress since the previous quarter was driven by noticeable increases in distress in the utilities, 23.9 per cent, sports and health clubs at 12.4 per cent, food and beverages at 10.8 per cent, and bars and restaurants at 10 per cent sectors.
In contrast, in Scotland, just three of the 22 sectors monitored by Red Flag Alert reported a fall in this early-stage distress, including print and packaging at 15.7 per cent manufacturing at 9.1 per cent, and professional services at 1.6 per cent.
READ MORE:
- 'Concerning' rise of Scottish firms in distress
- 'Reeves must inject confidence back into the economy'
- Trepidation over UK Budget grows
Ken Pattullo, managing partner for Begbies Traynor in Scotland, said: “With many businesses still struggling to recover from the ravages of Covid and Brexit, combined with ongoing inflationary pressures affecting every part of the economy, 2024 is proving to be another tough year. Despite some initial return of confidence following the change of government, uncertainty is continuing to weigh on the UK economy, and a worrying number of businesses are now reaching the end of the line.
“With over 31,000 companies in Scotland teetering on the edge of financial collapse, more than 37% higher than this time last year, there are widespread concerns around what the impending Budget might bring.”
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