Why Scotland's business distress and insolvency figures only tell half the story

Written by Ross Webb and originally published in The Business

Recent headlines have painted a grim picture of Scotland’s corporate health.

Government figures show a 6% year-on-year increase in company insolvencies recorded in April 2026, while BTG’s Red Flag Alert highlighted a 51% rise in businesses facing critical states of distress across Scotland in Q1 of 2026 compared to the same period in 2025. Looking at this data, it is tempting to conclude that Scotland’s business community is in an ever-growing state of crisis.

However, while the high level of concern is mirrored in the findings of Aberdein Considine's SME Business Outlook 2026, which saw 81% of SMEs across Scotland say their viability was at risk, the insolvency and distress figures obscure a more complex and resilient picture of the Scottish market. 

Our survey indicated that, despite widespread fears for business continuity, Scotland's businesses are still planning to invest, bolster skills and deliver growth. Businesses have regularly had to absorb major economic shocks for close to two decades now, and as a result, business owners have emerged resilient.

While almost every sector across Scotland will be feeling economic pressure, capital remains available in the market. Alternative funders, specialist lenders, private equity providers, asset-based lenders and investors who continue to seek out value and growth are increasingly active. And while traditional bank lending remains available, it has become more selective, meaning businesses may need to seek out forms of support that look less conventional than they are used to. This could involve shorter-term facilities, higher pricing or more creatively structured security packages.

Those engaging with early advice have more options on the table than they may think. Restructuring and debt recovery strategies can be put in place before a situation becomes irretrievable, ensuring day-to-day operations are covered and that cash flow pressures are addressed before they become critical. A pre-packaged (or pre-pack) administration, in which the sale of a distressed company's business and assets is negotiated in advance, can be an effective route to preserve a business's underlying value and protect jobs. However, the window for retaining control narrows the longer action is delayed, so the sooner advice is sought, the better.

Insolvency is a deeply nuanced area. There is a tendency to view it negatively, to see a business failing as a sign of wider economic malaise, or even personal failure on the part of the director. But an active insolvency sector can be a sign of an economy moving forward rather than one in freefall.

Scottish insolvency figures for 2025/2026 show that voluntary company liquidations outnumber compulsory liquidations, suggesting that many directors are making active, considered decisions to exit rather than being pushed out by creditors.

When a business can exit the market cleanly, owners can redirect their capital and energy towards more productive endeavours. This prevents the entrenchment of “zombie companies”: businesses that survive without growing, profiting or contributing to the wider economy, consuming resources that could be better deployed elsewhere.

While it can feel like a road with no off-ramp, business owners facing financial difficulty who seek advice early will always have more options available than those who do not. Bringing in specialists at an early stage allows teams to build a managed strategy, anticipate creditor responses and, where possible, protect and enhance the value of the business.

The earlier that conversation starts, the more control remains in the hands of business owners.