Businesses in Scotland saw a rise in both advanced and early signs of financial distress in the first quarter of 2024 compared with the same period last year.

The latest data from business rescue and recovery specialist Begbies Traynor, whose Red Flag Alert has measured and reported corporate financial distress for two decades, found that there was a 22.6% increase in more advanced or “critical” distress among Scottish businesses in Q1 2024 compared to Q1 2023.

This type of severe distress affected over 2,060 businesses in Scotland.

The level was also greater than the UK-wide figure which saw a 20.1% rise in critical distress since Q1 2023, representing over 40,170 businesses.

In the first quarter of 2024, while Scotland saw an 8% fall in critical distress since the previous quarter, this was lower than the drop of 15.4% across the UK as a whole.

Looking at “significant” or early-stage financial distress, 35.9% more businesses in Scotland experienced an increase compared to Q1 2023, impacting almost 28,000 Scots firms in 2024’s first three months.

This type of distress—which refers to businesses showing deterioration in key financial ratios and indicators—also saw a rise of 7.1% in Scotland since the previous quarter.

These figures are above the national average, with a 2.7% increase in UK-wide levels of significant distress quarter-on-quarter, and a 30.8% uplift in incidences of businesses across the UK seeing a year-on-year increase in early distress, representing more than 554,550 businesses.

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Speaking on the new data, which has come about amid sticky UK inflation and the fading prospect of interest rate cuts, Ken Pattullo, managing partner for Begbies Traynor in Scotland, said: “It is no surprise that businesses in Scotland and across the UK are continuing to struggle in the face of such a tough economic climate.

“Unfortunately, inflation is slowing less than expected and with ongoing global unrest, the picture is far from certain.

“In Scotland, it’s evident that both business-to-business and consumer-facing sectors are suffering as many people continue to struggle from the pressure of rising prices and are yet to feel that the UK economy is on the road to recovery.

“We urge businesses to keep a close eye on their financial situation and seek professional advice as soon as any problems become evident in order to prevent them from escalating further.”