A more robust approach by HMRC to collecting taxes has seen corporate insolvencies in Scotland reach their highest level in two years.
Figures for the last quarter were driven by a sharp increase in compulsory liquidations which are now at their highest point since before the pandemic.
The data from the Accountant in Bankruptcy shows corporate insolvency numbers (liquidations and receiverships) in Scotland in the first quarter of the financial year (Apr-Jun) increased by 17.3% to 332 compared with the 283 in the same period last year.
They also increased by 12.9% compared with the 294 in the previous quarter (Jan-Mar) indicating a deteriorating trend.
Personal insolvency numbers (bankruptcies and protected trust deeds) fell by 5.8% to 1,935 year-on-year, but they increased by 15.8% compared with the previous quarter’s total of 1,671.
Tim Cooper, immediate past president of restructuring, turnaround and insolvency trade body R3 and partner at Addleshaw Goddard, said: “Corporate insolvency activity in Scotland is picking up pace, with more firms entering an insolvency process last quarter than at any point in the past two years.
“This upward trend stands in contrast to England and Wales, where corporate insolvency numbers increased only slightly on the quarter and fell year-on-year.
“The more significant rise and overall upward trend in Scotland has been driven largely by a significant increase in compulsory liquidations, which have reached their highest level in six years, a high proportion of which are driven by HMRC, indicating a more robust approach to tax debt collection and enforcement, and other creditors adopting a similar and more active approach through the courts.”
Mr Cooper said creditors’ voluntary liquidations have dipped slightly compared to both the previous quarter and the same period in 2024.
“This all paints a picture in the Scottish economy of businesses struggling with liquidity to pay creditors as they fall due, with creditors including HMRC taking proactive court action to enforce payment or bring businesses to a close and prevent further losses.
“There are indications that momentum in Scotland’s economy is stalling, and these latest figures indicate more businesses in Scotland are paying the price.
“Amid high operating costs, low confidence, and persistent inflation, many firms are facing tough choices around whether to keep trading, let alone grow.”
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