Mon, 23 Jan 2023 | BUSINESS NEWS
New research from insolvency and restructuring trade body R3 has revealed a 32 per cent increase in insolvency-related activity in Scotland in December 2022, compared to the same period a year earlier. The jump in activity comes amid a UK-wide increase in insolvencies, as companies struggle with a range of headwinds.
R3’s analysis of Creditsafe data found that there were 142 instances of insolvency-related activity in Scotland last month, compared to 107 in December 2021. This figure was the second-highest for 2022, behind only March, which saw 201 cases of insolvency-related activity.
The figure was the biggest year-on-year increase in insolvency activity across all the regions and nations of the UK. The next highest increase was in the East Midlands (22.8 per cent), followed by the West Midlands (9.8 per cent) and the South West (9.2 per cent).
Recent figures from the UK’s Insolvency Service found that there had been 1,964 company insolvencies across the UK in December 2022, up 32 per cent from December 2021 and a 76 per cent increase compared to December 2019, prior to the COVID-19 pandemic.
This increase was largely driven by a 22 per cent year-on-year increase in creditors’ voluntary liquidations, which rose to 1,659 in December 2022. A range of factors are contributing to this sharp rise in insolvencies, including rising costs, falling consumer sentiment, COVID-19-related debts and owner fatigue following the pandemic and several years of economic and political uncertainty.
Figures from PwC also found that 346 winding-up petitions (a key indicator of approaching financial distress) were issued in December 2022. This was on top of the nearly 3,000 winding-up petitions issued during the first 11 months of last year, more than three times the number that were issued during the first 11 months of 2021, and points to continuing financial distress among UK businesses.
Richard Bathgate, Chair of R3 in Scotland, commented: “More and more directors are turning to insolvency processes to resolve their financial issues in the face of rising costs, low consumer confidence, and ongoing economic turbulence.”
“These issues aren’t going to go away overnight, and we urge company directors to be aware of the first signs of financial distress and seek advice from a qualified source as soon as they show themselves. By doing so, they’ll have more time and more options available to them than if they’d waited for the issue to get worse and could potentially find that taking action earlier leads to a better outcome for their businesses.”
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