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May 24, 2022

Meston Reid & Co: Detecting trends in Scottish insolvencies

By Michael Reid, managing partner, Meston Reid & Co
I recall the harbingers of doom and their forecasts that 2021 would bring large-scale corporate and personal insolvencies.

A number of businesses did inevitably close amid tough trading circumstances, but to the relief of many wholesale insolvencies did not materialise.

That said, there are clear signs that ‘zombie’ companies have managed to plot their way through 2021 with the support of grants, bounce-back loans, furlough payments and new repayment arrangements – without changing their basic economic model.

That’s not sustainable; it can’t last forever.

These recent quarterly company statistics for Scotland (the comparable English ones are in brackets) make for interesting reading:

  • 33 court liquidations (105)
  • 182 company voluntary liquidations (3,471)
  • 16 administrations (169)
  • 0 company voluntary arrangements (20)

Curiously perhaps, the Scottish statistics are not consistently proportionate to those of a neighbour with 10 times the population, but of course such data has to be viewed with caution when it comes to drawing conclusions or understanding scale – one liquidation with liabilities of £50,000 represents just one statistic, as does a liquidation with liabilities of £50 million.

Generally speaking, 2021 was fairly quiet when it came to formal insolvencies.

It may be that the harbingers of doom are correct but were simply one year too early; one can see an upturn in requests for advice from company directors and individuals, trading or otherwise, who are encountering cash flow problems.

Indeed, the recent restrictions on social gatherings will not have helped those businesses in the hospitality or events industries, or those trading on the High Street, to survive another challenging period.

We shall see what challenges 2022 has in store.

Michael Reid is a managing partner at Meston Reid & Co, an Aberdeen-based chartered accountancy practice with strong expertise in tax, audit, insolvency, corporate finance, business advisory, payroll and landed estates. The firm, based at Carden Place, has a broad range of clients, from contractors in the energy sector to large businesses with international operations.