Record numbers of companies going bust across Scotland, figures reveal

Closing down: More companies are going bust.

More companies are going bust than ever before, according to figures for the first quarter of the year.

A total of 420 firms went insolvent or entered receivership between January and March, said Accountant in Bankruptcy (AiB), Scotland's insolvency service.

The figure was up 9.1% on the record level set in the previous quarter and more than a fifth (22.4%) higher than the first quarter of last year.

AiB said the total comprises 348 compulsory liquidations, 62 creditors' voluntary liquidations and ten receiverships.

Meanwhile, the number of personal insolvencies rose 14.9% to around 5600. The service said 3310 of these were awards of bankruptcy, up 26% on the previous quarter and up 12.3% on the first quarter of last year.

The rise could be explained in part by more people applying for bankruptcy before higher fees were introduced in June, AiB said.

Figures for the debt arrangement scheme, an alternative to going bankrupt, show that more debt payment programmes were approved, up 56.9% from the previous quarter to 1478 and up 129.9% compared with the same quarter of last year.

Enterprise Minister Fergus Ewing said: "The rise in bankruptcies, specifically applications for bankruptcy from debtors, can partly be attributed to a rush prior to 1 June before application fees increased. I fully expect this trend not to continue into the next quarter.

"However, we must not be complacent and, instead, face up to the challenge that these difficult economic times place upon us.

"AiB is working closely with stakeholders to develop debt relief and debt management options for the people of Scotland. It is important that individuals in debt receive appropriate information at the right time, which is focused on their own particular needs."

Business advisors PKF said little has changed in the economy since the start of the economic crisis in 2008.

Bryan Jackson, a corporate recovery partner with the firm, said: "We still have an enormous number of Scots being made bankrupt, with little sign of any improvement in the coming year. These figures clearly show that there is no let-up in the financial distress which Scots are experiencing.

"With below-inflation wage rises, increased utility costs and little sign of an end to the economic misery, it is clear that many more tens of thousands of Scots will be made bankrupt before we start to see an end to the after-effects of this recession."

Joanne Gillies, a partner and expert in contentious insolvency at lawyers Pinsent Masons, said compulsory liquidations are up almost 40% on the same period last year.

"That would suggest that creditors are increasingly reluctant to accept further delays in payment in a market which shows no signs of improving. This effectively means that contentious insolvencies are on the rise and we'll see more disputes played out in the courts."

Bruce Cartwright, head of business recovery services at PwC in Scotland, said: "There is no getting away from the fact that for many people these are difficult times with stark choices having to be made about personal expenditure. There is no doubt that 2012 will remain a challenge for households."

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