Drop in levels of ‘critical distress’

Levels of “critical” business distress among Scottish firms fell ahead of the UK average in the last three months, a report found.

But Scottish businesses had the largest increase in significant distress totals in the last quarter compared to a year ago, accountancy firm Begbies Traynor said.

The firm’s quarterly “red Flag Alert” found that the largest rise in critical distress was in the construction industry, while hotels, media, transport and logistics also felt the heat.

Meanwhile, manufacturing and retailing sectors both saw “healthy falls” in distress levels.

Begbies said “critical” distress was the most serious signs that indicate the early onset of financial problems. Instances of critical distress levels in Scotland, which include decrees totalling over £5,000 and winding-up petitions, fell by 17% quarter on quarter, and 16% compared with a year ago.

This compared favourably with the UK average fall of just 2% in the last three months, and 6% since the same period in 2015.

Instances of “significant” business distress, the most common indicators of less serious problems, have risen by 2% year on year, exactly tracking the UK average, and fell by 7% since the last quarter reporting in July (compared with a fall of 6% across the whole UK).

“There appears to have been no immediate impact from the Brexit vote in June, but whether the improvements to export exchange rates and pricing have mitigated the uncertainty and drop in confidence is still unclear,” said Ken Pattullo, who leads Begbies Traynor in Scotland.

Ken Pattullo