25 Apr 2012

Scottish Insolvencies on the Rise - How to Protect Your Business

Scottish Insolvencies on the Rise - How to Protect Your Business

Rob Aberdein, Dispute Resolution Partner, considers the recent insolvency data released by the Accountant in Bankruptcy (AiB) and what it means for businesses.

Rob Aberdein, Dispute Resolution Partner, considers the recent insolvency data released by the Accountant in Bankruptcy (AiB) and what it means for businesses.

What the numbers say

The Accountant in Bankruptcy (AiB) has reported that personal insolvencies in Scotland for the fourth quarter of 2011-12 increased to 4,856.  This represented a 4% increase on the previous quarter and a 14% in the same period in the previous year.  The personal insolvency data included bankruptcy awards and protected trust deeds.

On the corporate insolvency side of things the AiB has also reported that 385 Scottish firms became insolvent or entered receivership during the last quarter of 2011-12.  This number was 37.5% higher than the previous quarter and 30.9% higher than the same period last year.

The figures translate to the scary statistic of nearly 30 businesses a week going bust in Scotland during the first 13 weeks of 2012.

The bigger picture

While the news that the UK has officially fallen into a double-dip recession is perhaps unsurprising that such significant increases in personal and corporate insolvency are manifesting.

If you speak to most Insolvency Practitioners they will tell you that over the last five years many businesses have managed to stay afloat by tightening their belts and running down cash reserves.  With a drawn out period of low economic activity, continued troubles in the Eurozone and continued restrictions on lending by banks: the situation does not look like it will improve any time soon.

The Scottish angle

At a regional level the Scottish electoral cycle has meant that many of the tough austerity measures deployed in England following the last UK electoral cycle have yet to be fully replicated, deployed and felt in Scotland.

Scottish businesses and consumers will also have to deal with significant public sector spending cuts that will mean reduced governmental spending and high levels of public sector redundancies.

Be pro-active

Businesses must therefore be on top of their debt recovery procedures and be more pro-active in the recovery of outstanding invoices and fees. More often than not it is the creditor who shouts loudest or is at the front of the queue that will get paid first.

There are also some very helpful legislative provisions and tactics we can help clients deploy – this may just be the proper use of the Late Payment of Commercial Debts legislation but could also be the innovative and creative use of the Insolvency acts and instruments in order to ensure payment.

Whatever the chosen tactics are, you must have a strategy in place and it must be reviewed on a regular basis in order to ensure write offs and bad debts are avoided and risk mitigated.

Rob Aberdein, Partner


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