According to the latest analysis from KPMG, the number of companies in Scotland declaring insolvency has risen by 46% in six months. Experts at KPMG have attributed the dramatic rise to instability in the current economy, particularly pointing to Brexit as a leading factor.
Head of restructuring, at KPMG, Blair Nimmo said:
"The ongoing Brexit discussions and change of Prime Minister and Cabinet have undoubtedly created a climate of uncertainty, but there are wider challenges at play, creating a toxic mix of issues for businesses going through a period of distress."
The analysis highlighted that there had been 698 corporate insolvency appointments in the period running from January 2019- June 2019. In the preceding six-month period, there were 479 corporate insolvency appointments.
Of the 698 cases of corporate insolvency, 661 involved company liquidation with only 37 being administration and receivership appointments. However, circumstances may not be ad bad as they seem, and in fact, these numbers are similar to the same period in the preceding year. In addition, although there appears to be a trend of increasing corporate insolvencies, there are also signs of improved resilience in what is a difficult time for business. KPMG highlighted that the last quarter has been more static, with many industries taking 'pro-active measures' to become more financially stable. Retailers were explicitly mentioned, taking measures such as corporate voluntary arrangement proposals ahead of insolvency in a bid to prevent going into administration.
KPMG has advised firms to be financially cautious in this period of uncertainty. Nimmo added:
"The best approach for any business in Scotland right now is to maintain a fiscally cautious approach, ensuring you maximise reserves, proactively and regularly review contingency plans and - ultimately - plan for any worst-case scenarios."
There are many challenges ahead for business as we go through political and financial upheaval in the face of Brexit and other issues causing uncertainty. It is vital for companies struggling to maintain solvency to take financial advice at an early stage and to take measures to protect themselves from insolvency. Nimmo added:
"With a resilient, focused approach, including taking appropriate advice at an early stage, Scotland's business community can continue to grow sustainably in the long-term."
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