In Focus Risk
‘Scottish firms generally more stable than rest of the UK’
Despite positive news for the region, upcoming political events may still lead to concerns over solvency
Tim Cooper Chair, R3 in Scotland
Scotland has the lowest proportion of firms at greater than average risk of insolvency of anywhere in the UK, although the percentage of Scottish companies at elevated risk has risen sharply over the last six months, according to our research. In the April figures, Scotland had the
lowest overall rate of firms at higher than normal risk of insolvency, at one in three (32.5%), against a UK proportion of two in five (39.1%).
Steep climb However, this represents a steep climb in risk levels compared to six months ago, in October 2017, when under a quarter of Scottish firms (23.8%) fell into the elevated risk category (UK: 29.8%). The rise in the risk profile of Scottish
companies matches what R3’s Scottish members have been seeing in their work with distressed businesses over the past few months, with growing demand for advisory and restructuring support. While it is good news for the Scottish
economy that our businesses have the lowest risk profile of anywhere in the UK, it is still concerning to see the proportion of firms at greater than usual risk rise from under a quarter to one in three in just six months. This underlines that no business owner can
afford to be complacent. Fuel prices have ticked upward since
October, inflation has been rising, consumer confidence has been falling, while business
May 2018
www.CCRMagazine.com
While it is good news for the Scottish economy that our businesses have the lowest risk profile of anywhere in the UK, it is still concerning to see the proportion of firms at greater than usual risk rise from under a quarter to one in three in just six months
confidence has been dented by a series of high-profile insolvencies – there are many reasons why more firms are now at risk. Rises in both the National Minimum and
Living Wage, and also in the minimum contribution to workplace pensions came into effect in April, which will soon start to have an impact, as many consumers will see their take-home pay fall, while businesses’ payroll costs rise.
Hospitality sector Looking at specific industry sectors, this pattern persists. In October last year, Scotland had a
lower level of firms at elevated risk in nine of the 11 industry sectors that we monitor. In the latest research, Scottish firms beat the rest of the UK in eight out of 11 sectors, as well as in overall terms. In the hospitality sector, Scotland’s pubs
once again boasted the lowest level of companies at higher than normal risk, at 26.5%. This figure is over 7% higher than six
months ago (October 2017: 19.3%), having risen at a slightly slower rate than the pub sector in the UK overall, which went from 23.5% to 31.1% over the same period. Restaurants fell slightly in the regional
rankings between October and April, from third lowest (21.8%) to fourth lowest (29.9%), while Scotland’s hotels climbed the risk rankings, from fifth highest level of firms at elevated risk in October (23.2%) to third highest in April (33.9%). CCR
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