Scottish firms have seen “significant rises” in the most serious signals of business distress since the first quarter of 2017, new figures show.
Business rescue and recovery specialist Begbies Traynor said its latest quarterly Red Flag Alert data revealed a 27% jump in “critical” cases north of the border, compared with a 1% fall across the UK as a whole.
Northern Ireland (41%) and Wales (37%) saw even bigger increases than Scotland in the same period, according to Begbies, whose “critical” measure covers firms facing court decrees for debts totalling more than £5,000 and winding-up petitions.
Ken Pattullo, who leads Begbies in Scotland, said falling car sales, the completion of a number of large construction infrastructure projects and stagnating wages reducing consumer spending were all factors influencing the Scottish data.
He added: “The sectors hardest hit were automotive, construction and financial and professional services, but there was distress in almost every area of the economy and these early warning signs are very concerning.
“The fragility of the economy is becoming evident, with the potentially seismic changes in policy around Brexit and the impact this has on foreign trade and exchange rates, and little has become clearer after the general election.
“We rarely see such large increases in distress right across the spectrum of business in Scotland, and the whole UK, and it is never welcome news.”
Begbies said there were a total of 61 instances of “critical” business distress in the latest period, up from 48 three months earlier, while “significant’ instances” totalled grew by 13% to 17,102.
The firm also highlighted concerns that large civil engineering projects, including the new Queensferry Crossing, that were finished or nearing completion, have disguised the true state of the construction industry north of the border.
While UK figures showed a small drop in “critical” cases in the latest quarter, compared with the previous three months, the number of companies in “significant” financial distress was up by 25% year-on-year, to 329,834, as firms grappled with sluggish consumer spending and Brexit-induced price increases. Small and medium-sized businesses made up the lion’s share of struggling companies, rising 26% to 308,423, with sectors relying on consumer spending hit the hardest.
Begbies said it was “worrying” to see so many businesses battling for survival as the UK negotiates its divorce from the European Union.