RSM responds to Q2 Scottish insolvency statistics

The statistics released today by the Accountant in Bankruptcy show that corporate insolvencies have decreased in the second quarter of 2016/17 by 15.5 per cent from Q1, while long term personal insolvencies remain stable, albeit with an increase of 5.9 per cent from the previous quarter.

Commenting on the figures, Paul Dounis, RSM Restructuring Advisory Partner in Scotland, said:

‘Corporate insolvency rates have decreased in the second quarter of 2016-17 by 15.5 per cent against the first quarter of 2016-17 - reversing the recent upwards trend. However with the recent fall in the pound on the back of the Brexit vote, it is too early to determine if this will be a long term change. 

‘We have already seen the cost of fuel at the pumps increasing following the Brexit decision. While this will have little direct impact on these numbers, the cost of raw materials and goods will start to increase putting further strain on some businesses which may already be struggling. Corporate insolvencies are 19.4 per cent higher than this time last year and with the recent inflationary impact as a result of currency, it is too early to determine if the decrease in corporate insolvency rates will continue.

‘According to the latest Industrial Trends Survey from the CBI, exports have received a significant boost from the weakness of sterling, with export volumes growing at their fastest pace for two and a half years in the three months to October. The survey also found that the weaker pound was impacting on costs which are rising rapidly and are likely to impact consumer prices in the months ahead. 

‘Solvent liquidations have decreased significantly from 215 in Q1 to 106 in the current quarter, representing a decrease of 50.7 per cent. This decrease has returned solvent liquidations to a comparable level prior to Q3 2015/16.

‘The total number of personal insolvencies remained below 2,500 for the sixth straight quarter, however there was an increase of 29.8 per cent on the previous quarter and 45.2 per cent higher than the same quarter in the previous year. There were 408 debt payment programs completed, which is 12.1 per cent up on the previous quarter, and a 14.3 per cent rise compared to the same quarter of 2015-16.  

‘The British Bankers’ Association advised that consumer credit has grown by 6 per cent annually in September, as people increasingly use short-term borrowing to take advantage of record low interest rates. This has resulted in an accelerated increase in demand for personal loans and credit cards since the Bank of England cut the base rate to 0.25 per cent, and whilst the cost of borrowing is now cheaper, this could also be as a result of the tougher economic conditions requiring people to borrow more than previously.

‘With the continuing uncertainty surrounding Brexit and the possibility of a second independence referendum, the increase in borrowing, something which has not been seen at this level since immediately prior to the last recession, could be a warning of future financial difficulties for some consumers.’