Number of construction firms in financial distress up by a third

Number of construction firms in financial distress up by a third

The number of construction companies in Scotland experiencing financial distress has increased by 31% in the past three months.

The latest Red Flag Alert data from business rescue and recovery specialist Begbies Traynor shows businesses in Scotland experiencing a hike in both early-stage financial and more advanced financial distress in the last quarter of 2023.

In the final three months of the year, there was a 25.9% rise in levels of Scottish businesses seeing advanced or ‘critical’ distress compared with the previous quarter. There was also a 9.1% increase compared with the same period in 2022 with this type of severe distress now affecting over 2,240 businesses in Scotland.



Some sectors were particularly badly hit with printing and packaging seeing a quarter-on-quarter rise in critical distress of 150%; hotels (+111%); professional services (+49%); food & drink (+40%); leisure and cultural activities (+35%); and construction (+31%).

Only two sectors in Scotland saw critical distress fall since the previous quarter – travel and tourism decreased by 23%; and utilities by 21.%.

The less advanced ‘significant’ distress (which refers to businesses showing deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth) also experienced an uplift in Scotland of 14.2% quarter-on-quarter; and a rise of 5.9% year-on-year. More than 26,000 Scottish businesses suffered from significant distress in Q4 2023.

The picture across the UK reflected the trends in Scotland with a 25.9% uplift in critical distress in the last quarter of 2023 compared with the third quarter of the year, with almost 47,500 businesses now affected. Instances of significant distress nationally also increased by 12.9% quarter-on-quarter, and by 5.6% year-on-year, representing a total of 539,900 businesses.



Ken Pattullo, managing partner for Begbies Traynor in Scotland, said: “It is concerning to see early and advanced distress in Scotland and, indeed, across the whole of the UK, continuing to climb. With no respite from high interest rates and rising costs, both businesses and consumers are struggling.

“Given the UK’s performance in recent years and with further ‘stagflation’ predicted, a technical recession remains a distinct possibility in the second half of 2024. This, together with a climate of global geo-political uncertainty, makes it more important than ever that businesses proceed with caution and seek advice from insolvency professionals at the first signs of trouble.”


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