Scottish businesses struggle to pay debts

David Walters of Creditsafe

THE number of County Court Judgements (CCJs) issued to businesses over the last three years has increased by 105%, with Scotland reporting an increase of 41%. 

Research by UK credit check specialist Creditsafe paints a bleak picture for businesses up and down the country, with all regions seeing an increase in CCJs. 54,371 CCJs were issued from May 2018 to April 2019, compared to 26,413 in the same period two years prior. 

A CCJ is a court order that a creditor (someone that has extended services or products to you at a cost) has taken out against you for an unpaid debt. It is the action of the courts instructed by the creditor to get the money back to the person/company owed. 

Businesses in Scotland saw a significant increase in CCJs, known as CCJs in Scotland, filed against them, – with 1,144 in 2016-2017, rising to 1,611 in 2018-2019, an increase of 41%. Records of judgments are kept on file for six years unless the debtor pays the full amount within a month, which can make it more difficult to get credit.

The data shows an upwards trend in CCJs being taken out against Scottish firms, painting a worrying picture according to David Walters, head of data at Creditsafe: “The findings are damning and show that businesses across the country are struggling to keep up with repayments. Though we can’t say for sure, it’s likely that the volatility surrounding Brexit has had a negative effect, and that will continue until we know for sure what form Brexit is going to take. 

“Of course, running a business is by no means easy, and especially not during a time of economic uncertainty, but being issued a CCJ will stay on your credit file for six years, which can be accessed by any member of the public for a small fee – they’ll be able to see your name, address, the case and court number and the amount of money owed. Having a CCJ on file will likely hinder any business as it will make it harder to take out further credit, and get out of financial difficulty.”

Recent data released by Creditsafe also found an increase in the number of insolvencies across every UK region from May 2016 to April 2019. Northern Ireland saw the biggest rise with a 114% increase in the number of failing businesses in the area; East Anglia reported a rise of 62%. The West Midlands had the fewest insolvencies over the past three years, although the figure had still increased by 10%. 

Marie Dancer, managing partner at Richard Nelson LLP, commented: “As Creditsafe mention, we are in times of economic uncertainty. As a law firm, we have also been aware of the increased demand for commercial litigation services. But it does not make it any less surprising that businesses would take on services or goods that they could not pay for.

“Debt can affect the ongoing wellbeing of a business and the financial wellbeing of the business owners. This, in turn, can affect their productivity and business growth. CCJs are kept on businesses’ files for six years. We know that business disputes can be lengthy, and the longer they go on, the more it is likely to cost.”

Comparing the total number of CCJs issued across each region from 2016/17 to 2018/19, the percentage increases were as follows:

  • Greater London – 151%
  • East Anglia – 121%
  • Northern Ireland – 112%
  • South East – 95% 
  • North West – 93%
  • West Midlands – 91%
  • North East – 90%
  • Wales – 85%
  • South West – 85%
  • East Midlands – 80% 
  • Yorkshire and Humberside – 69% 
  • Scotland – 41% 

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