Increase in number of Scottish firms expected to go bust by end of 2018

The number of corporate firms failing in Scotland is on course to be the highest since 2012.

Analysis published by the accountants French Duncan LLP indicates the number of corporate insolvencies recorded in 2018 (736) has already exceeded the number in the entirety of 2017 (780).

It is anticipated the number will surpass the 1,000 mark – a level not seen since 2012.

Despite the increase, there has been a drop in the number of firms failing in the third quarter for 2018 – down from 245 in the previous quarter by 5.3% to 232.

Construction, retail and casual dining accounted for more than 40% of all corporate failures in the first two quarters of 2018 according to the report.

Lending to the construction sector contracted whilst retailers and casual dining outlets have experienced major shifts in consumer attitudes, the findings said.

Eileen Blackburn, the head of restructuring and debt advisory at French Duncan LLP, explained: “There are always periods when corporate failures rise and fall but this one is unusual.

“The last peak was in the years immediately after the financial crash when such outcomes were to be expected, but this time it is happening when interest rates are benign, when employment is at a 43-year high, and when the economy is growing albeit at a relatively slow rate.

“The concern is whether this highlights an underlying serious problem with the economy or whether it is simply a temporary blip as markets realign themselves and settle at their own level.

“The next few months will be telling but, in the meantime, I think that many more Scottish firms will go bust until greater stability can be established in the market.”