The UK government’s Insolvency Service recently released data that revealed Scottish insolvencies had hit a record level. According to experts, the number of insolvencies in 2012 was set to continue. The figures show that 1,526 companies went into administration, receivership or liquidation last year, which equates to four every day of the year. The increased number of insolvencies has been attributed to public sector cuts, reduced spending by consumers and a lack of business funding.
During the last quarter of 2011, 385 companies faced insolvency with 290 of those companies going into liquidation. One of the partners at Johnston Carmichael, Matt Henderson deals in corporate insolvency, and he expressed concern at the number of liquidations rather than administration. If a company enters into administration, the procedure is designed to save a business whereas liquidation is the final option for a business.
The Office of the Accountant in Bankruptcy released the data of Scottish receiverships and liquidations, while figures from the Insolvency Service show which sectors are affected by the insolvencies. A corporate recovery partner at PKF accountants, Bryan Jackson stated that the hospitality sector is being adversely affected by reduced consumer spending, while businesses dealing in property are continuing to fall at an alarming rate. The head of corporate recovery at HBJ Gately, Graeme Henry added:
“This is probably the thin end of the wedge for insolvencies. These figures suggest there is still some significant pain in front of us as the economy recovers.”