SCOTLAND has a lower proportion of businesses considered to have a higher-than-normal risk of falling into insolvency in the next year than any other part of the UK, the latest research has shown.
Overall, 20.6 per cent of Scottish businesses are considered to have a heightened risk of insolvency, compared with a UK average of 23.8 per cent, according to the research published by insolvency and restructuring trade body R3.
London has the greatest proportion, with 24.8 per cent of its businesses viewed as having a greater-than-normal risk of insolvency.
In all but one of 10 sectors tracked by R3, using Bureau van Dijk’s ‘Fame’ database, Scotland performed better than the UK average. Manufacturing was the only sector in which Scotland had a greater proportion of businesses with a heightened risk of insolvency than the UK average.
The R3 tracker measures companies’ balances sheets, director track records and other information to work out their likelihood of survival over the next 12 months
Across Scotland, agriculture was the sector with the lowest proportion of businesses at heightened risk, at 17.7 per cent. Technology and IT had the highest, at 33.3 per cent.
Asked about Scotland’s lower proportion of businesses with heightened risk of insolvency, in the context of tough times for its economy, R3 chairman in Scotland Tim Cooper observed many firms in, and reliant on, the north-east oil and gas sector had built up strong balance sheets during the good years.
He said: “If you look at oil and gas, you would expect there to be higher risk in terms of signs of distress there, but balance sheets have historically been pretty strong.”
Mr Cooper, a partner at law firm HBJ Gateley in Edinburgh, added: “It has been an industry and an economic region, with other businesses like leisure, hotels, discretionary spend businesses, cars, automotive, all of the things that exist around Aberdeen - because there has been so much money floating around so long, their balance sheets have been strong.
“They have been able to weather the storm with these balance sheets.”
Mr Cooper highlighted the importance of businesses managing their finances carefully in the “unfamiliar territory” in which they found themselves following the UK electorate’s June 23 vote to leave the European Union.
Commenting on the latest research, Mr Cooper added: “The trend, compared with the rest of the UK, does seem to be consistent. Every time I get the data from R3, it seems to be Scotland’s risk indicators are lower than elsewhere.
“Perhaps Scottish businesses are just more astute at managing risk. I would like to think so…That is one possible conclusion you might make.”
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