THE NUMBER of businesses filing for administration across Scotland increased significantly in the third quarter of 2022 as economic headwinds continued to rock businesses across the country.
These findings were identified by Interpath Advisory in its latest analysis of notices published in The Gazette. A total of 14 Scotland-based companies fell into administration from July to September 2022, compared to 3 from April to June 2022.
This mirrors the picture of the UK which saw a total of 265 businesses fall into administration from July to September 2022 – up from 176 in the same period in 2021 and up from 243 in Q3 2020. However, administrations do not have not yet reached pre-pandemic levels of 401 in Q3 2019.
August – traditionally the quietest month for insolvency appointments – saw the highest monthly number of administrations across the UK since March 2020, with 105 appointments.
The growing number of insolvencies can be seen across a wide range of sectors, with building and construction, industrial manufacturing, leisure and hospitality, retail and the food and beverage industry all seeing increased activity .
Blair Nimmo, Managing Director of Interpath Advisory, said: “The summer months often herald a quieter period for business failures, and the fact that August saw the highest monthly total in more than two years is particularly revealing.
“We know that businesses across Scotland have been struggling with a myriad of issues for some time, from rampant inflation to supply chain challenges, to labor shortages, so this is perhaps the first real evidence that a significant shift in restructuring activity is underway. .”
He added: “And let us remember: the bulk of the administrations seen in the last quarter landed long before the economic and political storm we have witnessed in recent weeks.
“The impact of rising interest rates, fluctuations in exchange rates and gilts, and rising energy prices from October 1 have not yet materialized, but will not serve any purpose. doubt that it would add to the extraordinary pressure that companies were already under.”
Alistair McAlinden, head of Interpath Advisory in Scotland, continued: “We are now in a situation where interest rates could well exceed 5% by spring next year, which will put increased pressure on the cash flow of any highly indebted Scottish business, and particularly those whose position is unhedged.Additionally, with suppliers trying to manage the impact of a weaker pound sterling on imports, and consumers Adapting to rising mortgages and falling disposable income, businesses will be squeezed in all directions.
“While the UK government has stepped in to provide some relief from rising energy costs and new loans for start-ups and small businesses, for many businesses tough choices remain to be made. .”
Alistair McAlinden concluded: “From our own experience at Interpath, we are certainly seeing an increase in activity across Scotland, as evidenced recently by administrations in the oil services and construction sectors and, more specifically , 10 subsidiaries of the Arjowiggins paper group. . Based on our current pipeline, we believe that by the end of the fourth quarter of this year, insolvency levels will have increased further. Identifying cash flow pinch points and seeking advice early will be essential for businesses to thrive and survive in the weeks and months to come. »