Business failures most likely in first half of year

Company bosses are being urged to review their strategies and seek help if they have concerns over their company’s future, after a study has revealed that business failures are most likely during the first half of the year – when financial pressures come to a head.

Accountancy firm Azets has analysed corporate insolvencies statistics collated by the Scottish Government from 2011 to 2021, and found that over the period 4.22 per cent more businesses folded in Scotland during the first six months of the year – or around 430 additional insolvencies during the decade –than the second.

Azets had in November said it believed a “wave” of personal insolvencies was likely in 2022, amid the rising cost of living.

Blair Milne, restructuring partner with Azets in Scotland, is now encouraging companies to review business plans, particularly given further Covid restrictions, labour shortages, increased costs for materials, fuel, staffing and utilities – with the likes of hospitality and retail particularly at risk.

He added that generally, financial pressures jump from January to June as bills from the preceding year start to accumulate in the first quarter. “Those businesses already struggling with cashflow and working-capital problems will therefore be under severe financial pressure by the summer, if not before,” he said.

The restructuring expert also said that amid Azets’ latest findings, “it is important that directors review now their current trading position and liquidity, check projected figures for the next 12 months, and revisit the costs of any business loans”.