New data has shown that businesses in Scotland, alongside many other regions of the UK, saw further rises in signs of financial distress in Q4 2024.

According to business rescue and recovery specialist Begbies Traynor, whose Red Flag Alert has measured and reported corporate financial distress since 2004, “critical” instances of financial distress rose by a massive 56.5% from Q3 to 2,353 in Q4. This is 6.3% higher than the UK average rise of 50.2%.

The latest data also revealed that in Q4 2024, there was a 25.4% increase in levels of Scots business suffering from “significant” financial distress compared with Q4 2023. This figure is around 4% higher than the UK average year-on-year rise of 21.3%.

This latter type of distress, which refers to deterioration in key financial ratios and indicators like working capital and retained profits, was recorded in 32,696 instances in Scotland. Meanwhile, across the wider UK, there were more than 654,000 instances of business financial distress, and a marginally slower quarter-on-quarter rise of 3.5%.

Industry-wise, almost every sector in Scotland saw rises in critical distress compared with the previous three-month period, with utilities being one of the sectors to see the highest rises. Professional services, meanwhile, was one of the most affected sectors to experience significant financial distress compared to the prior quarter.

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Commenting on the findings, Ken Pattullo, who serves as managing partner for Begbies Traynor in Scotland, said: “The huge jump in critical distress compared to last quarter hides a slight fall in that measure year on year, and can in part be attributed to seasonal peaks and troughs.

“However, the data for significant distress levels tends to predict future critical distress some months later, and is something of an early warning of widespread impact to come.

“Yet another quarter of increased distress is compounded by the imminent impact of the Autumn budget and increased associated costs for business.

“There is evidence that cost inflation, although lower than a year ago, is still trickling through the supply chain, and layer on top of that the additional costs of employing staff from April 2025 and things look fairly grim for the second half of the year.

Mr Pattullo continued: “It’s clear that with so many businesses carrying so much debt the unwelcome additional cost burden that resulted for many employers in the recent budget could well be the straw that broke the camel’s back for many Scottish firms.”