Scottish businesses experienced a hike in both early-stage and more advanced financial distress in the last quarter of 2023, new research from Begbies Traynor, the business recovery company, has found.

According to the latest data, there was a 25.9% rise in levels of Scottish businesses seeing advanced or “critical” distress in Q4 last year when compared to the previous quarter. Further, there was a 9.1% increase compared with the same period in 2022, with this type of severe distress affecting over 2,240 businesses in Scotland.

The less advanced “significant” distress (which refers to businesses showing deterioration in key financial indicators and ratios, including those measuring working capital, retained profits, net worth, and more) 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 however reflected the trends in Scotland. At the UK-level, there was a 25.9% uplift in critical distress in the last quarter of 2023 compared with the third quarter, with almost 47,500 businesses affected.

Instances of less advanced “significant” distress across the UK also increased by 12.9% quarter-on-quarter, and by 5.6% year-on-year, representing a total of 539,900 businesses.

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Speaking on the firm’s latest research, managing partner for Begbies Traynor in Scotland, Ken Pattullo, 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.”