News In Focus
Scottish insolvencies “of great concern”
All types of personal insolvency fell in Scotland toward the end of 2010, even as businesses went bust at a record rate, according to new figures.
The latest report from the Accountant in Bankruptcy, covering Q4 2010, saw the number of Scots being made bankrupt fall to 4,583 from 5,168 in the previous quarter which was a fall of 19.5% on the same quarter in 2009.
Minister for Community Safety Fergus Ewing welcomed the figures as a "positive sign of recovery" in the Scottish economy, pointing to the fact that the total was the lowest since the low income, low asset (LILA) bankruptcy scheme was introduced in April 2008, despite the introduction of the new certificated route into bankruptcy in November.
However, Anne Buchanan, corporate recovery partner with PKF, cautioned against premature celebration: “With the full impact of the public sector cuts yet to be felt and with rising utility costs and potentially increased base rates, I believe the situation this year may be about to get worse and hit the better off in society more than in previous years.
“What remains equally worrying is that personal insolvency levels continue to be at a much higher rate than our English or Welsh counterparts. Given Scotland’s heavy dependency upon the public sector for employment and for growth generation I would expect the impact of the forthcoming cuts to be greater here than elsewhere. The consequent impact on personal insolvency is likely, therefore, to be greater in Scotland in the future.”
Meanwhile, the situation among Scottish businesses continued to deteriorate, according to the insolvency industry body, R3.
The number of Scots companies going bust in Q4 rose by 7.3% compared to the previous quarter and by 23.8% compared to the same quarter of last year, bringing the total number of failures in 2010 to a record 1098 companies.
John Hall, Scottish R3 council member, explained: “We are seeing the continued fallout from the recession impacting on a broad range of Scottish firms. These figures are the result of businesses not being able to turn themselves around fast enough to respond to the changing marketplace.”
He concluded: “I believe these figures are of great concern as they have occurred at a time when there was a relatively benign attitude from HMRC and there were expectations of an improvement in the economy. Given that the private sector is meant to be supporting the economy out of the current economic position it is worrying that clearly so many firms are struggling to survive. I think that 2011 will, unfortunately, be just as bad and that the continued impact of the recession will be felt for several more years to come.”