Smaller businesses could disproportionately bear the brunt of the economic challenges looming in Scotland, according to a licensed insolvency practitioner.
Michael Reid, Partner at MHA, Aberdeen, said the upcoming increases in National Insurance and minimum wage, as well as footfall issues, meant tough times lie ahead for smaller firms.
Despite new figures showing a drop in corporate insolvencies and personal bankruptcies, it’s smaller businesses that are unable to keep creditors at bay.
Figures from the Scottish Statutory Debt Solutions Statistics showed there were 1,784 personal insolvencies in 2024-25 Q3 - 11.4% fewer than in the same quarter in the previous financial year.
There were 617 bankruptcies – a drop of 0.6% when compared to the same period the previous year. 506 bankruptcy awards were made following applications to AiB, through the revised fee structure.
Of this, 92.3% applicants were not required to pay any fee - normally £150 - because they qualified for MAP (Minimal Asset Process), based upon the Scottish understanding that if you have nothing, you shouldn’t 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.
Michael Reid, Partner at MHA
Michael, who is based in MHA’s Carden Place office, said: “That covers most 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.”
Michael said his insolvency team at MHA are seeing examples of falling footfall for clients in many sectors, but particularly retail, hospitality and 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.”
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 most recent (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
Michael added: “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.”