The number of Scottish firms reporting early stages of financial meltdown has rocketed by one-third, compared with a year ago, new figures show.
It emerged 25,200 businesses suffered significant financial distress during the first quarter of 2018, up from 18,888 previously, according to business rescue and recovery specialist Begbies Traynor.
Thousands of firms across the UK have experienced a worsening of financial health since Article 50 was triggered just over a year ago, with increased levels of distress seen across all sectors and regions, Begbies said yesterday.
In its latest Red Flag Alert report monitoring the financial health of companies, Begbies said 477,210 UK businesses were suffering significant financial distress at the end of March 2018, up from 358,943 a year earlier.
Ken Pattullo, who leads Begbies in Scotland, said: “To see such a dramatic rise in significant distress since last year, both in Scotland and across the whole of the UK, is extremely worrying.
“Amid continuing concerns about the impact of Brexit and falling confidence among businesses and consumers, the prospects for the British economy in the year ahead look far from promising.
“Directors would be well-advised to keep a close eye on cash flow and seek professional help at the first signs of trouble.”
Begbie’s said the increase in Scotland affected many sectors, with the worst hit being telecommunications (a 57% rise), professional services (+50%); leisure and culture (+47%) and financial services (+46%).
The best performing sectors were hotels and accommodation (up just 8%), bars and restaurants (+15%), food and drink retail (+16%) and printing (+17%).
Begbies’ definition of “significant” distress includes firms which have had a minor court decree against them or suffered a marked deterioration in key financial ratios.
Despite the year-on-year jump, the latest quarterly totals for Scotland and the UK were down by 3% on the final quarter of 2017.
The number of Scottish firms suffering “critical” distress, including those which have faced winding up petitions or decrees totalling more than £5,000, was down by 51% year-on-year to 44.
UK-wide, there were 855 fewer business in the critical category in the latest period as the number of firms suffering major financial problems fell to 1,980.
Begbies partner Julie Palmer said: “While uncertainty around the outcome of the Brexit negotiations has undoubtedly had an impact on business confidence across the UK, the economy has also faced a wide range of unexpected headwinds.
“Currency fluctuations, rising interest rates, subdued consumer spending and a cooling property market are just some of the factors that have combined with growing political uncertainty to push nearly half a million UK businesses into financial distress over the past year.”
