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Woes at Aberdeen paper mill and Peterhead firm reflect soaring Scottish insolvencies

stoneywood paper mill
Stoneywood paper mill in Aberdeen is a casualty of third quarter insolvencies.

Company numbers filing for administration across Scotland soared from three to 14 between the second and third quarters of this year as the economy continued to be battered by major headwinds.

The figures are from KPMG UK’s former restructuring practice, Interpath Advisory, which tracked companies from July to September.

UK-wide data shows a total of 265 companies falling into administration from July to September 2022 – up from 176 in the same period in 2021 and 243 in Q3 2020.

Administrations are yet to hit pre-pandemic levels, with  a total of 401 registered in Q3 2019, Interpath said.

Nearly 400 jobs on the line at Aberdeen paper mill

Recent examples include subsidiaries of the Arjowiggins group, threatening nearly 400 jobs at the historic Stoneywood paper mill in Aberdeen.

A 30-year-old Peterhead shotblasting firm – GCG Shotblasting Services – also went bust, with most of the jobs among a 13-strong workforce axed.

Administrators for GCG Shotblasting Services said it was a casualty of Covid after it struggled to recover from disruption caused by the pandemic.

Picture of words: company, liquidation, insolvency and creditors in it.
Businesses are facing major challenges.

August is traditionally the quietest month for insolvency appointments.

But this year the month saw the highest monthly number of administrations across the UK since March 2020, with 105.

The insolvencies cover a wide range of sectors, including construction, industrial manufacturing, leisure, hospitality and retail, as well as the food and drink industry all witnessing increased activity.

Interpath chief executive Blair Nimmo said: “The summer months often herald a quieter period for corporate insolvencies and so the fact August witnessed the highest monthly total in more than two years is particularly telling.

Significant shift in restructuring activity is now under way.”

Blair Nimmo, chief executive, Interpath Advisory.

“We know companies across Scotland have been wrestling with myriad issues for some time, from rampant inflation to supply chain challenges and labour shortages.

“This is perhaps the first real evidence a significant shift in restructuring activity is now under way.”

Mr Nimmo said rising interest rates, currency woes and the increase in energy prices from October 1 were likely to “compound the extraordinary pressure” on businesses.

He added: “The bulk of administrations seen in the past quarter landed well before the economic and political storm we’ve witnessed in the past few weeks.”

Interpath Advisory chief executive Blair Nimmo.
Interpath Advisory chief executive Blair Nimmo.

Alistair McAlinden, head of Interpath in Scotland, said: “We’re now in a situation where interest rates may well be above 5% by spring of next year – putting increased pressure on cashflows for any Scottish business with high debt levels, especially those with an unhedged position.

“Further, with suppliers trying to navigate the impact of a weaker sterling on imports, and consumers adjusting to rising mortgages and lower disposable income, businesses are going to be squeezed in all directions.

“While the UK Government has intervened to provide certain relief in respect of rising energy costs and new loans for start-ups and small businesses, for many, some difficult choices lie ahead.”

Coins and banknotes.
Weaker sterling has impacted imports.

Mr McAlinden added: “Based on our current pipeline, we would suggest by the end of Q4 this year, insolvency levels will have risen even further.

“Identifying cash pinch points and seeking advice early will be key for business to thrive and survive over the coming weeks and months.”

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