Business

Surge in the number of firms in ‘critical distress’

Businesses in Scotland saw a dramatic uplift in instances of advanced financial distress in the final quarter of 2021 as the emergence of the Omicron variant hampered growth.

According to the latest Red Flag Alert published by Begbies Traynor, businesses in Scotland suffered a 10 per cent rise in “critical” distress between the third and fourth quarters of last year. This was markedly higher than the rest of the UK which experienced an increase of just 1%.

READ MORE: Scottish insolvencies leap as directors ‘make decision to close’ after pandemic struggle

However, compared to the same period a year earlier, levels of critical distress – firms that have had winding up petitions or decrees totalling more than £5,000 against them – in Scotland fell by 33%. This compared with a 7% increase across the UK as a whole.

Similarly, levels of early-stage or “significant” distress in both Scotland and across the UK grew quarter-on-quarter at the end of 2021, but fell on an annual basis.

In Scotland, almost all sectors saw a rise in significant distress since the previous quarter, with utilities businesses hit hardest by a 10% increase. The travel and tourism, food and beverage, and wholesale sectors all posted an increase of 9%.

No sectors in the country experienced a quarter-on-quarter fall in early distress.

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