No well of savings for small businesses in these tough economic times
Michael J M Reid March 24th 2025
Smaller businesses could disproportionately bear the brunt of the economic challenges looming in Scotland.
Despite new figures showing a drop in corporate insolvencies and personal bankruptcies, tough times lie ahead for smaller firms in particular with the upcoming increases in National Insurance and minimum wage.
Declining confidence in the economy means many are seeing a drop in footfall and my insolvency team are seeing examples of this across the country in many sectors, but particularly retail, hospitality, leisure.
There is undoubtedly an increasing clarion call for equality of business rates. Whilst some large entities are paying comparatively less rates due to their online presence, smaller businesses with premises are paying for such presence and querying why that should be the case.
We seem to have reached a consistent position of a set number of people going bankrupt every year in Scotland and there will always be a soft underbelly of businesses who just do not make it.
The Scottish Statutory Debt Solutions Statistics, covering October to December 2024, have been published. They show there were:
- 1,784 personal insolvencies (bankruptcies and PTDs) in 2024-25 Q3, 230 (11.4%) fewer than in the same quarter in the previous financial year (2023-24 Q3).
- 617 bankruptcies – a drop of 0.6% when compared to the same quarter the previous year. PTDs decreased by 16.2% since 2023-24 Q3 with 1,167 reported in the latest figures.
- 506 bankruptcy awards were made following applications to AiB, through the revised fee structure. Of this, 467 (92.3%) applicants were not required to pay any fee at all.
Out of these 506 bankruptcy awards, 92.3% were not required to pay an application fee (normally £150) because they qualified for MAP (Minimal Asset Process), based upon the Scottish understanding that if you have nothing, you shouldn’t have to pay a fee. Assets of less than £2,000 and liabilities of less than £25,000 qualify a person to apply under the MAP rules.
That is the majority of people who go bankrupt, so it’s not the large trading businesses that are failing with massive debts. Indeed, businesses with assets seem to be able to keep creditors at bay whereas those individuals with nothing are throwing in the towel and saying they cannot carry on.
Many people are facing economic challenges, and this is likely to continue or even worsen with increased pressures coming from mortgage rates not falling, footfall dropping. The looming increases in National Insurance and minimum wage are making some people worry that their employer won’t be able to keep them in a job... making things even more concerning.
For those running smaller businesses, there’s no huge well of savings to rely upon. Those running these firms are holding off on bigger purchases like moving house or booking holidays. Therefore, that money isn’t going back into the economy. It’s a downward spiral with a lack of confidence across the board.
Meanwhile, latest figures show business insolvencies in Scotland fell significantly.
Liquidations and receiverships fell by 2.4% in Q3 2024-2025, compared with Q3 2023-2024, to a total of 285. In December 2024, 82 company insolvencies were registered in Scotland, down 24% compared to the same month in the previous year.
While the decrease has been reported, the figures remain higher than in 2022 and that of pre-Covid levels.
The December 2024 insolvencies in Scotland comprised:
- 52 Creditors’ Voluntary Liquidations (CVLs)
- 27 compulsory liquidations
- 3 administrations
- There were no Company Voluntary Arrangements (CVAs) or receivership appointments
While the drop off may seem like positive news and signs of buoyant recovery for businesses as the year came to an end, the broader economic context means challenging times remain.
