One of the curious aspects about the official corporate insolvency statistics that are produced from The Insolvency Service every month is that, by necessity, they are one month behind.
So while Scottish schools, colleges, universities and workplaces are all back after the holiday and festival season, the latest statistics from August reflect the reality of a late Summer.
Holidays and relaxation were in the air, even if the sun wasn’t and this is reflected in the overall reduction in the headline numbers.
In Scotland last month there were 102 company insolvencies recorded in August. This was a decrease of 15 from last month and 9% lower than the numbers seen in August 2023.
This total consisted of 56 CVLs (down from 76 in July); 42 compulsory liquidations (up from 33); two administrations (down from eight); two receivership appointments and no CVAs.
Scotland has historically seen more compulsory liquidations than any other kind of insolvency process but since April 2020, CVLs overtook them and have remained higher ever since.
This shows that more Scottish directors and their accountants are being proactive and taking difficult but practical decisions earlier rather than relying on their creditors to take action themselves and force the closure of their companies.
The total insolvency rate in Scotland for the 12 months up to and including August 2024 was 53.2 per 10,000 companies on the effective register. This was down by 1.7 from the preceding 12 months up to and including August 2023.
“August’s slowdown shouldn’t distract from struggling businesses with high levels of debt”
Tim Cooper, President of R3, the insolvency and restructuring trade body said: “The monthly fall in corporate insolvency figures across the UK is likely to be a result of the traditional slowdown in appointments we see during August.
“This shouldn’t distract from the fact that businesses are still struggling and many are still trying to manage high levels of debt at a time when trading conditions remain difficult.
“While the overall economic picture has improved, the market remains a challenging one, and managing costs is still very much a key concern for many directors.
“From a sectoral perspective, retail sales increased in the summer and construction output increased in July but it remains to be seen whether this is enough to compensate for months of challenging trading conditions and whether the pre-Christmas trading period can provide the boost companies right across the economy badly need.
“Looking more broadly, now the Bank of England’s Monetary Policy Committee has made its decision on the rate of interest, firms may be prepared to look at their financing arrangements as many are likely to have been delaying this decision until after the announcement.
“However, there may be limited options available and this could lead to more discussions around restructuring options for businesses seeking alternatives to a fresh injection of funds.
“Of these, restructuring plans remain an option sought by a range of businesses across the UK and the accounting profession is continuing to search for a means of making them accessible to SMEs.
“Some of the most recent case law would suggest progress is being made, which is positive news given current levels of corporate insolvency and the challenges faced by the business community.”
With Autumn blowing in with the force of winter, many Scottish businesses will be considering how to hunker down for the next few months or get ready for a busy festive and Hogmanay period which is less than 100 days away.
No matter what challenges are facing your business, the chances are that you can do something right now to improve things.
The first thing you can do is to get in touch with us today and arrange a free initial consultation at a convenient time for you.
Once our advisors get a clearer picture of your business and unique circumstances you face they’ll be able to give you a full rundown of the options available.
The sooner you arrange a chat, the sooner you can put in place the changes that will benefit you for the rest of 2024.