More Scottish firms in ‘critical distress’

CASH FLOW: SMEs advised to keep a close eye on company finances

There have been escalating numbers of Scottish businesses showing ‘critical’ distress levels, according to a new report by insolvency expert Begbies Traynor.

The firm’s latest quarterly ‘red flag’ report, which monitors financial health, reveals the pace of Scottish firms deemed to be in trouble outstripped the rest of the UK.

It showed there was an 18% rise in firms showing advanced distress in Scotland, compared with the same period last year. UK-wide there was a 5% increase.

Ken Pattullo, who leads Begbies Traynor in Scotland, said: “Once again, we are seeing higher levels of businesses in Scotland facing advanced financial distress as they continue to try to operate amid ongoing political and economic uncertainty.

“The combination of a slowdown in consumer spending, together with rising levels of company debt, is worrying.”

The analysis considers firms to be in distress if there are decrees against them or a marked deterioration in key financial ratios.

The growing financial distress is evident in most sectors with construction, food and beverage, and bars and restaurants businesses seeing the most marked rises.

“The construction industry is continuing to suffer, with consumerfacing businesses such as bars and restaurants also showing a marked increase in levels of ‘critical’ distress,” Mr Pattullo said.

“For smaller companies that are already feeling the squeeze, increasing debt levels can often be the final straw in a downward spiral.

“It’s vital that SMEs keep a close eye on cash flow and seek professional advice at the first signs of financial distress.”

Ken Pattullo, who leads Begbies Traynor in Scotland.