1,000 Closures Predicted for Scottish Businesses in 2015

Insolvency experts have fired a shot across the bows of Scottish businesses by predicting a thousand closures in 2015, equivalent to 20 every week.

Insolvency practitioners have fired a shot across the bows of Scottish businesses, predicting 1,000 company closures and 12,000 personal bankruptcies in the coming year.

Although the warning might sound counterintuitive, one of Scotland’s leading corporate financial experts believes the improving economy in 2015 carries hidden risks for companies that have recently emerged from the depths of a long recession.

The predictions come amidst claims that, while many companies will be expecting an improvement on last year’s performance, there are signs the economic recovery is starting to stall. Consumer demand is cooling and financial and geopolitical uncertainties are starting to surface. There are also the problems posed by an anticipated rise in interest rates.

There is also the revelation that, despite the reports of declining numbers of companies in the midst of liquidation, receivership, administration and company voluntary arrangements in the rest of the UK, figures in Scotland have shown a considerable rise. In a surprising reversal of the strong declining trend, corporate insolvencies actually rose by 13.4 percent in the 12 months to September 2014.

The slightest change in circumstances could have serious consequences

The predicted 1,000 corporate insolvencies and 12,000 personal bankruptcies equates to around 20 companies and 230 Scots going bust every week of 2015. There is the risk that individuals and businesses that are simply surviving will be pushed over the edge by frozen wages, higher living costs or even a slight change in circumstances.

Despite signs of economic improvement north of the border, such as falling unemployment levels and decreasing oil prices, there are a number of other indicators which do not paint such a positive picture.

Many businesses and individuals struggling to keep their heads above water face another year of flat profits and static incomes. As a result, any change in their circumstances could have serious results.

A spokesperson for the BDO accountancy group that made the prediction, said: “The number of businesses falling into insolvency is likely to be around 1,000. Many of these businesses may only be shell companies but it is of concern that, even six years after the start of the recession, there are still so many firms going bust”.

Personal insolvency figures remain high

There have also been signs that the reduction in Scottish personal insolvencies may be starting to level off.

This figure has been falling steadily from the 2009 peak when 23,541 Scots were made bankrupt. However, the figure for third quarter of 2014 rose, and there is every likelihood that personal insolvencies in Scotland will remain around the 12,000 mark.

Although this figure compares favourably with the high in 2009, there is a concern that any reduction in personal insolvencies is being celebrated, despite the fact that the numbers are still very high given the historical context.

These latest predictions come as the Scottish government launches a new Financial Health Service website which provides individuals with links to various debt advice, ethical lending and money management bodies which can help people struggling with debt.

Insolvency options for businesses

There are also a number of insolvency options for businesses on the brink of going bust. Whether it’s cashflow problems that make it difficult for businesses to pay their bills; historic debts that hinder an otherwise viable company; or an inability to raise the finance a business needs, help is at hand. Here are some of the most common business insolvency problems and the potential solutions that may be applied.

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