9 May 2012
Scottish firms facing financial difficulties
Figures for 2011 show that Scottish companies comprised only 0.8% of the total of UK company voluntary arrangements (CVAs), compared to 99.2% from England and Wales. The figures have not significantly improved since the start of the recession in 2008, when Scots firms made up 0.7% of the UK's CVA total.
Given Scotland's roughly 7% share of the total number of UK companies, this means that non-Scottish UK businesses were 10 times more likely to seek a late- stage rescue deal to save their businesses.
In 2011, as many as 1237 Scottish registered companies went into liquidation, including compulsory liquidations and creditors' voluntary liquidations, while 236 went into administration. A mere 14 Scottish companies entered CVAs, a figure described by Keith Steven of specialist advisers Company Rescue as "a scandalous waste of good businesses".
Annette Menzies, who heads the five-strong business recovery team for accountants Haines Watts in Glasgow said: "It's getting worrying that there is no sign of a rescue culture emerging in Scotland. It's very difficult for CVA experts to get in front of failing businesses in Scotland but the truth is that if we can get in sooner there is much more of a chance to make a difference. The skill-set of people who start businesses, including those with a lot of entrepreneurial spirit, does not include experience in this field, so it's much easier for outside experts to help people face the figures and make the tough decisions that business owners don't want to make, for example with personnel."
Haines Watts, which aims to grow fee income in Scotland by more than 50% to over £7m by 2014, is recruiting more specialists in CVA as part of its Scottish expansion strategy.
Menzies said that improving the situation in Scotland revealed by the statistics was largely about educating business owners. "People should be aware that it's never too early to speak to someone if you have concerns about the viability of your business. A good time to think about it is when people, through no fault of your business, stop paying you."
Among the benefits of a CVA, currently being sought by Rangers FC, are that the company continues to trade under the control of directors, historic debts are frozen with no further interest, and deferral of payments eases pressure on cash flow. Repayment terms are made flexible and creditors are allowed to impose no further enforcement action.
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