More and more companies will be forced under during the next five years despite continued improvement in the Scottish economy, a leading restructuring specialist has warned.
Bryan Jackson well-known for his role as lead administrator at a string of ailing football clubs warned business distress would continue, as rising interest rates take their toll.
He was speaking after new figures from the Government agency responsible for liquidations and receiverships revealed almost 250 Scottish companies went bust during the first three months of this year.
Accountant in Bankruptcy said there had been a 70% increase in the number of corporate registrations during the period equivalent to around 100 additional failures compared to the same time a year ago.
By contrast the number of personal insolvencies fell, thanks to a “sharp” drop in the number of protected trust deeds.
Mr Jackson, of accountancy and advisory firm BDO, said the increase in insolvencies was “unwelcome, but predictable, news”.
“Though the economy is in recovery, many Scottish businesses are still struggling to cope with the triple challenge of rising inflation, staff costs and slow spending,” he said.
“Unless troubled businesses see a perceptible upturn from the wider recovery, many will be left fighting to survive. Ironically, it isn’t surprising to see more corporate failures as the economy picks up.”
He urged struggling firms to seek advice now, because pressures would likely continue to build over the coming years.
“I believe that we will still be seeing elevated levels of corporate failure as a result of the recession for the next four to five years when increased interest rates take their toll,” Mr Jackson added.
The 244 firms which served notices during the three months to the end of March also marked a 6% quarter-on-quarter rise on the last few weeks of 2013.
But the AiB figures also showed how personal insolvencies fell by 14% on the same period last year and by more than 10% against the previous quarter as part of a long-term general decline since 2008.
Bankruptcies increased 4% on the previous quarter, to 1,726, but remained 6% lower than the total for the same period last year.
Use of the Debt Arrangement Scheme fell 13.3% on the last quarter, but remained 4.8% higher than the first quarter of 2013, while the number of protected trust deeds decreased by 24% and 23% respectively.
Mr Jackson said the fall in personal insolvencies was unsurprising given the “most benign interest rate ever”, but warned about what could happen when this begins to step up.
“The problem is that many individuals and families are now financially planning on the basis of a % base rate when historically the rate should be much higher,” he said.
“I believe that although we have seen a subdued level of personal insolvencies this may change as interest rates rise and home ownership costs increase at the same time that wages are relatively static.”