Alarm at business distress data

Concerns have been raised after business distress rates soared in the first three months of the year.

The latest Red Flag Alert report from business rescue and recovery specialist Begbies Traynor reveals that 25,200 businesses in Scotland experienced “significant” financial distress in the first quarter.

This marks a year-on-year rise of 33 per cent – the same as the Uk-wide figure – and equates to 6,312 more businesses in the country being affected by this type of distress, which includes those with minor decrees against them and those displaying a marked deterioration in key financial ratios.

However, when measured quarter-on-quarter, there was a decrease of 3 per cent both in Scotland and across the UK.

In terms of the more serious “critical” distress, which refers to businesses that have had winding up petitions or decrees totalling more than £5,000 against them, the latest data shows a year-on-year fall of 51 per cent in Scotland, compared with a drop of 30 per cent across the UK as a whole.

Ken Pattullo, who leads Begbies Traynor in Scotland, said: “To see such a dramatic rise in significant distress since last year, both in Scotland and across the whole of the UK, is extremely worrying.

“Amid continuing concerns about the impact of Brexit and falling confidence among businesses and consumers, the prospects for the British economy in the year ahead look far from promising.

“With economic growth predicted to continue to lag behind that of the other G7 nations in 2018, there seems little hope of a change in fortunes and directors would be well advised to keep a close eye on cash flow.”