Scottish corporate insolvencies during 2021 were 17.9% higher than in 2020, rising from 597 to 704 last year.
Such liquidations and receiverships were also up by 13.3% during the third quarter of 2021, compared with the second quarter – and by 77% compared with the third quarter of 2020.
However, personal insolvency numbers – bankruptcies and protected trust deeds – in Scotland were 16.9% lower in 2021 than in 2020, falling to 7,543 from 9,078 the year before.
This figure was up by 7.5% in the third quarter of 2021, compared with the pervious quarter, but there was no change compared with the third quarter of 2020.
Commenting on the official Scottish Insolvency Statistics, Richard Bathgate, chair of insolvency and restructuring trade body R3 in Scotland and restructuring partner at Johnston Carmichael, said that the annual increase in corporate insolvencies has been driven by the rise in Creditors’ Voluntary Liquidations, which indicates that many directors are closing businesses after struggling to trade through the pandemic.
“One factor that will have played into the rise in corporate insolvencies was the ending of government Covid support measures,” he explained.
In January 2021, the furlough scheme was supporting almost 400,000 jobs in Scotland. Once it came to an end in September, along with the expiry of other support measures – such as certain rates relief for Scottish retail, hospitality and leisure businesses and a range of state-backed loans – businesses had to make tough decisions about whether their future was sustainable.
As well as Omicron-related restrictions over Christmas hitting many sectors, Bathgate also pointed to inflation reaching the highest level in over a decade.
“Uncertainty around the Omicron variant meant consumer spending remained relatively low this Christmas, particularly compared to last winter, and as a result many businesses missed out on the boost in income the festive period usually brings.
“However, the benefits of a swift deployment of the booster vaccine roll-out are now starting to be felt, with nightclubs in Scotland having once again opened their doors and an expectation that Scotland’s work from home guidance may be relaxed next week, I hope we will soon start to see a return to some version of ‘normal’.”
Meanwhile, the fall in annual personal insolvencies has been driven by a drop in bankruptcies and protected trust deeds, reinforcing the point that government support measures have prevented the economic effects of the pandemic from translating into higher levels of personal insolvency.
“Despite falling unemployment rates, 2021 saw the cost of living skyrocket for families, with rising fuel and energy bills, surging food prices and inflation hitting a near 30-year high, meaning many have been struggling, especially those on the lowest incomes,” noted Bathgate.
“In addition, National Insurance is set to go up from April 2022, so those who are already finding it tough to make ends meet may find they have even less left over each month.”
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