Record number of retail insolvencies in first quarter of 2019

Fears over the continuing crisis of high street stores in Scotland is evident after the retail sector experienced a record number of failures in the first quarter of the year.

New research from the Insolvency Service found 28 Scottish retailers filed for insolvency in the first three months of 2019. Having collated data since 2007, this is the highest figure recorded, with the third quarter of 2012 previously being the worst number of retailers going bust at 27.

While shop owners are facing the soaring costs in business rates, wages and utilities, customers are being drawn away from adding to retailers’ footfall and towards the endless shopping services now available online.

A survey by Local Data Company (LD) revealed 265 stores were closed in 2018 across eight Scottish towns and cities: Aberdeen, Ayr, Dundee, Edinburgh, Glasgow, Falkirk, Paisley and Perth. With only 146 stores opening in the same period, this was a net change of minus 119 on the high street.

With high street retailers struggling to compete with online shopping, several retailers are turning to company voluntary arrangements (CVAs) to scale back their physical presence and minimise rent bills.

At the end of April, the UK’s biggest department store chain Debenhams announced its plans to close 22 stores – one of which is located in Scotland – putting 1,200 jobs at risk. Debenhams was put through a pre-pack administration that wiped out the investment of shareholders, including Mike Ashely, the founder of Sports Direct.

For the 26 weeks to March, sales in the Debenhams stores fell 7.4 per cent. Its new owners, who are a consortium of banks and hedge funds, launched the major store-closure programme via a CVA. The CVA will allow them to renegotiate rents at the remaining stores across the UK. It has been said that 39 stores will stick to their current rental rates for the duration of their leases while the company aims to secure rental reductions of between 25 and 50 per cent for the remaining stores.

The announcement from Debenhams is just the tip of the iceberg. Last year saw House of Fraser closing stores after being bought out of administration, while Marks and Spencer is currently in the process of shutting 100 stores by next year.

The number of vacant retail units in Scotland is higher than the UK average, with recent economic figures suggesting consumer spending has slowed over the past two years. Named brands such as Carpetright, Homebase and New Look opted for CVAs, while companies like Fabb Sofas, Maplin and Toys R Us ended up in administration.

However, according to recent research from Savills, the number of empty retail units that were let out in Scotland last year was 82; eight per cent up on the long-term average. These vacant units were snatched up by chains such as Aldi and Lidl, with Homestore & More securing stores at Craigleith Retail Park in Edinburgh and Mavor Avenue in East Kilbride.

Mike Spens, Director of the out-of-town retail team at Savills in Scotland, concluded:

“Corporate failures in the retail sector in the last 12-18 months have released space onto the out of town retail market and allowed for a greater churn. This has created an opportunity for brands such as Home Bargains and the discount food retailers to expand across Scotland and for new entrants to secure representation.”

Despite this, accountancy firm, French Duncan, believe the pressures on the retail sector could result in 2019 being a record year for retail insolvencies in Scotland.

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Three-quarters of Brits have given up on their financial resolutions for 2019 - but there is still hope.

Many people make money-related resolutions at the beginning of the year, but as it turns to spring, around three-quarters of Brits will already have abandoned their financial plans according to the latest survey from Voucher Codes Pro.

But what is it about making changes to our finances that we find so challenging, and is there any way to set yourself up for success? Let’s take a look.

Setting realistic goals

Many people are over-ambitious with their goals. This includes estimating how quickly they can get out of debt, or how much they can save each month. It is no surprise that many people are looking to tackle spiralling personal debt as quickly as possible and so set unsustainable targets for themselves.

The recent study carried out by Voucher Codes Pro revealed that more than one-third of Brits set January goals to get out of debt, and another third wanted to save money for a variety of reasons. While the route to achieving these goals may seem to be to cut out as many luxuries as possible to make massive annual savings, the reality is that most people will slip-up with spending.

The resolutions most likely to fail according to the research are saving a set amount each month, and using no credit at all, which indicates that a lack of flexibility in your goals can be harmful to your progress overall.

Freedom Finance has also produced research which shows that it takes three attempts to complete a new year’s resolution, so there is still time to get back on track.

George Charles, a spokesperson for Voucher Codes Pro, said:

“Having failed at a new year’s resolution doesn’t mean that you have to throw the towel in and wait until 2020 to try again.”

“There’s no time like the present. We’re all going to slip up along the way, but what matters is that you make a conscious effort to do better with your finances for the sake of your future.”

Keeping track is the first step

While many believe that paying a set amount back each month is the route to success, most people will derive more significant benefit from just accurately tracking their spending.

You should examine your finances and keep track of your spending in detailing - cutting out unnecessary expenditure where you identify patterns. Suitable examples include available subscriptions, insurance or TV bundles. You should also look into whether you are paying too much for energy, broadband and mobile contracts - even the smallest reductions in cost can add up over the year.

Set small, manageable goals

While at the beginning of the year you may have estimated how much you could hypothetically save, falling behind on these savings can affect your enthusiasm.

Nick Green from said:

“A year is a long time, make it your resolution to set yourself small, regular goals over each week or month.

“Award yourself a small prize for achieving each one and tell your partner or a close friend about your goals, so they hold you to them.”

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We understand that facing up to financial challenges can be a tough and stressful time. However, you should be reassured to know that there are options available and, with the right advice and support, you can take the necessary steps to improve your situation. For specialist legal guidance on how you can get financially comfortable in Scotland, speak with one of our experts today.

Personal insolvencies in Scotland up by nearly 30% year-on-year

The number of Scots who are in serious financial difficulty has increased by 29.2 per cent in the last quarter of 2018-2019 (January-March) compared with the first three months of 2018, new figures show. This is despite unemployment being at a historic low and an increase in wages.

Accountant in Bankruptcy (AiB) reported personal insolvencies rose from 2,533 in the first three months of 2018 to 3,272 in the same quarter of 2019; the highest quarterly figure recorded since 2013. Some of the suggested reasons for the increase were high levels of household debt and the general economic uncertainty caused by Brexit.

There were 1,223 bankruptcies – also known as sequestration – awarded during this quarter, nine less than the previous quarter (1,232), but a 14.4 per cent rise on the same quarter of 2017-18 (1,069). Protected Trust Deeds (PTDs) was the main contributor to the overall rise in personal insolvencies, increasing nearly 40 per cent year-on-year from 1,464 to 2,049. PTDs have been on the rise since the January-March 2015.

In the first three months of 2019, there was a 22.1 per cent uplift in the number of people entering the Scottish government’s Debt Arrangement Scheme (DAS), which allows people to try to put their finances in order without going into insolvency. This figure has risen from 489 in 2017-18 to 597 in 2018-19. A total of £9.4 million was repaid through DAS during this quarter, an increase of 0.6 per cent on the £9.3 million recorded in 2017-18.

Additionally, there were 2,544 Debt Payment Programmes (DPPs) approved in 2018-19, 226 more than the previous year. A total of £37.1 million was repaid from debtors under DAS during 2018-19 compared with £37.6 million in 2017-18. In the first three months of 2019, 597 DPPs were approved under DAS, 108 more than the figure recorded in the same quarter of 2017-18 (489).

The figures mean personal insolvencies, bankruptcies and protected trust deeds (PTDs) have now risen for the third consecutive year but remain below levels seen previously between 2006-07 and 2013-14.

Corporate insolvencies in Scotland also rose by 34 per cent compared with the previous quarter (from 209 to 280), and eight per cent compared with the same quarter last year. The AiB reported 259 Scottish registered companies became insolvent or entered receivership in the first three months of 2017-18, compared with 280 in the same period of 2018-19.

Over the year, the number of corporate insolvencies increased by 9.3 per cent, from 884 in 2017-18 to 966 in 2018-19. The majority of corporate insolvencies are compulsory liquidations, an uplift of 34.2 per cent from 149 in January-March 2018 to 200 in the same period of this year. There were 137 member’s voluntary liquidations in the last quarter of 2018-19, 15 more than the previous quarter, and a 15 per cent increase (18 more) year-on-year.

Scottish government’s business secretary, Jamie Hepburn, concluded on the findings:

“In this climate it is more important than ever that people encountering financial difficulty seek early advice and the appropriate solution.

The Scottish government urges those in financial distress to obtain money advice at the earliest possibility in order to take control of their finances and ensure the right debt solution is found to suit their circumstances.”

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330,000 Scottish children live in households that are financially struggling

Official figures indicate that more than 300,000 children in Scotland are living in families who do not have access to emergency costs of up to £500.

The lack of financial flexibility among families has been flagged as a real concern as many Scots could be left in serious financial trouble if they are stuck with an unexpected household expense such as a broken boiler or having to replace a refrigerator.

Elaine Smith, MSP, referred to the current problem as putting Scottish families just “one big unexpected bill away from being in real financial trouble”.

Ms Smith explained:

“Replacing something like a fridge or boiler is expensive, but thousands of families with children would need to turn to debt to do it, because the cost of living, precarious work and stagnant wages aren’t letting people save for a rainy day.”

A recent YouGov survey of more than 2,000 Scots found that almost half (47 per cent) of Scottish workers run out of money before pay-day while 26 per cent have missed at least one council tax payment in the last year. Other issues were discovered during the survey, such as:

  • 30% would like to put away at least £20 per month for a ‘rainy day,’ but can’t afford to.
  • 28% can’t afford to keep their homes decorated in a decent condition.
  • 25% find it difficult or very difficult to cope with their current income.
  • 25% would like to save for a pension on a regular basis but can’t afford to.
  • 23% would like to have the recommended levels of dental treatment but can’t afford to.

The issue of poverty and financial insecurity in Scotland was also evident from debt help charity StepChange’s ‘Scotland in the Red’ report, claiming that nearly 700,000 Scots are either in, or at serious risk of falling into, problem debt.

The head of StepChange debt charity in Scotland, Sharon Bell, said she was "increasingly alarmed by the increases in the proportion of our clients who are struggling with household bills, particularly council tax".

With the average amount of council tax arrears amounting to £2,017, Ms Bell believes that “clients in Scotland are significantly more likely to have council tax arrears compared to elsewhere in the UK.”

The report found that nearly one in five were behind on their electricity bill; up four per cent on the previous year, while the amount they owed had increased by 10 per cent in just 12 months to an average of £826.

Stepchange found the most common reasons for debt were:

  • Reduced income (17 per cent)
  • Unemployment or redundancy (17 per cent)
  • Injury of illness (16 per cent)
  • Lack of budgeting (11 per cent)
  • Separation or divorce (10 per cent)

The most common age who reached out for debt advice was the 25-39-year-old age group (51 per cent). This was followed by those aged between 40 and 59 at 30 per cent, under 25s at 14 per cent, and over 60s at five per cent.

Couples with children accounted for 26 per cent of the people who contacted the charity in 2018. Despite single parents only representing six per cent of the entire UK population, the study found an increasing number of single parents are looking for debt help; rising from 18 per cent in 2014 to 23 per cent in 2018.

Douglas Hamilton, of the Poverty and Inequality Commission, believes the Scottish government needs to take meaningful action and must address the problem by “making full use of their powers to reduce housing costs, improve earnings and enhance social security.”

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Brits refuse to cut holidays in order to save money

Economic uncertainty caused by Brexit has encouraged Brits to seek better deals on insurance while reducing their spending on luxuries such as takeaways and shopping. However, recent research has found that the public refuse to sacrifice their trips abroad to improve their financial circumstances.

Since the 2016 Brexit referendum, consumer confidence has steadily fallen. Currently, 61 per cent of the public expects the UK economy to worsen over the next 12 months, and 41 per cent expect their personal financial situation to take a hit.

According to a recent YouGov poll, a third of Brits are concerned about the increasing costs of food and groceries and around one fifth (21 per cent) are worried that they do not have sufficient savings in case of an emergency.

To alleviate some of these Brexit-related worries, more than two-thirds (67 per cent) have said they plan to, or already have started, saving money. Of these respondents, three in five (61 per cent) say there is no particular reason for saving other than they want to be prepared for whatever comes.

Cutting expenses seems to be a high priority for several Brits. Around a third of those with a mortgage are reviewing their current rate (34 per cent) and more than a quarter (26 per cent) of insurance policyholders are looking to get cheaper deals on their critical illness cover, income protection and life insurance.

Additionally, the public has placed luxuries high up on their list of ways to cut costs. Takeaways are likely to take the biggest hit, with the most significant difference of minus 25 between those who say they will spend more and those who say they will spend less in the coming year. Coffee and snacks out are the next luxury most likely to go, with a gap of -18.

This was closely followed by having a gym membership (-14), and going to the cinema (-13). Consumers plan to spend less in the food and drinks industry as well, with ‘going out for drinks’ showing a gap of -12, and ‘eating out’ at -9.

However, the most expensive luxury on the poll - travelling abroad - looks to be the least affected. Despite many believing that holidays (66 per cent) and airfares (65 per cent) will be more costly following Brexit, only 24 per cent are actively planning to cut down on their travel spend in the next 12 months. In fact, two in five (40 per cent) have said they will definitely take a trip abroad in 2019.

Similar findings came from the leading association of travel, ABTA, when they discovered Brits would rather reduce their spending on eating out than cut back on their holidays (25 per cent vs 13 per cent). The most common items that people would consider cutting back on in order to save money was alcohol, cigarettes and takeaway meals.

Of the age groups surveyed, 18-24-year olds were the most committed to their holidays, with only six per cent saying they would reduce the number of trips they had to save money. This is despite the age group often being regarded as having the least disposable income.

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Facing up to your current financial problems can be extremely stressful. To mitigate these concerns and improve your financial position, get in touch with our experts.

30 signs you are financially comfortable

A new study commissioned by Skipton Building Society (SBS) has revealed 30 signs of being financially comfortable, including having savings and being able to go on a last minute holiday without feeling guilty.

The study, which polled 2000 adults, reveals signs of financial comfort include both material factors, such as having disposable income, as well as abstract factors, such as having others consider you wise and a good source of financial advice.

Kris Brewster, the head of products for SBS, said “it is more about making sensible decisions when it comes to spending and saving”, rather than “having a lot” financially.

Worryingly, less than half of those polled said that they were in a good place financially, and of that minority, 56% were over 55. One in four said that they do not know what the future holds for them financially.

Despite these bleak findings, one in seven of those polled said that they believed that they were sensible with money. The average respondent had approximately £228 a month of disposable income. According to the study, however, that is not enough to put you in the category of financial comfort. Instead, the research suggests that disposable income of over £500 a month is needed.

The following are the 30 signs factors which identify the financially comfortable:

  • Having savings
  • Not being in debt
  • Not having to count down the days until payday
  • Not regularly using savings to get through the month
  • Having paid off your mortgage
  • Having a "rainy day" fund
  • Being able to buy what you like without having to worry
  • Being able to afford emergency house maintenance
  • Having more than £500 disposable income a month
  • Being able to afford occasional treats for yourself
  • Budgeting effectively
  • Having a good credit score
  • Being able to eat out in restaurants without it being for a special occasion
  • Making sensible spending choices
  • Being able to go on more than one holiday a year
  • Being confident about the future
  • Being able to go on a last minute holiday without feeling guilty
  • Having the ability to make wise decisions about money and spending
  • Owning more than one property
  • Being able to make financial decisions without seeking advice
  • Not arguing over money with friends and family
  • Not having to check the price of clothes when shopping
  • Having multiple investments
  • Having good knowledge about financial services on the market
  • Not gambling or relying on a successful bet for income
  • Being generous when it comes to lending money to loved ones and donating to charity
  • Paying for others’ meals when out rather than splitting the bill
  • Being well-read when it comes to money management
  • Buying from the leading clothing and food brands
  • Having others approach you for advice about finances as they see you as a source of good advice

While some of the factors - such as having savings or a good credit score - may be unsurprising indicators of being financially comfortable, it is perhaps also unsurprising that so few young people identify as financially comfortable when factors include owning multiple properties or having various investments. For young people, in particular, these are rare luxuries.

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Extensive links between debt and suicide revealed

New research from the Money and Mental Health Policy Institute (MMHPI) has shown extensive connections between problem and suicidal thoughts and attempts, leading the organisation to call upon the government to change the law to provide better protection for debtors’ health, among other recommendations.

Report reveals link between financial problems and mental health issues

The recent survey was based on data gathered from both the Adult Psychiatric Morbidity Survey and a survey of those with personal and professional experience of suicide issues.

The report by the MMHPI revealed that nearly a quarter of people (23%) who attempted suicide in the past year were in problem debt.

What is problem debt?

People are defined as being in 'problem debt' when they are "seriously behind on payments for bills or credit agreements or have been disconnected by a utilities provider in the past year".

The pressures of financial problems were exemplified by the case of Jerome Rogers, the 20-year-old who took his own life last year after feeling too pressurised by debts arising from parking fines.

13% of people in problem debt - around 420,000 people - consider ending their lives every year. Of the 420,000 people, 100,000 attempt suicide every year. This means that people in problem debt are three times more likely to have considered suicide than those who are in a more financially stable state.

The MMHPI says that those in persistent poverty and financial insecurity are at higher risk of becoming suicidal, and that sudden triggers - such as threatening letters from creditors or rapid accumulation of fees - might push someone to become suicidal.

Recommendations made by the MMHPI

The MMHPI has made several recommendations in order to help break the connection between problem debt and suicide. In particular, it recommends that the government should review rules relating to how creditors word their letters in order to make them more supportive and comprehensive, and less aggressive.

The MMHPI also recommends that Public Health England improves its guidance to local authorities about the importance of financial difficulty as a potential trigger for mental health problems.

Essential service providers should offer suicide prevention training to their staff, the MMHPI further recommends.

Reactions to the report

Speaking to the Guardian, Vicki Nash, the head of policy and campaigns for the mental health charity Mind, explained:

“Mind [has] found that half of people with mental health problems have thought about or attempted suicide as a result of social issues such as housing issues, debt, benefit support, and employment.”

Nash also highlighted the importance of realising that there were real people behind the statistics - including parents, colleagues, and friends.

While the government has not announced any new Bills to implement the report’s recommendations, a spokesperson did tell the Guardian that “suicide is the most devastating outcome for people struggling with the challenges of life and we are committed to helping people in problem debt receive the proper support.”

The full survey can be read here.

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Barclays launches new techniques to help manage consumer debt

In a bid to help customers curb unhealthy spending habits, Barclays has become the first high street bank in the UK to allow users to turn off spending on gambling websites, as well as in other categories including groceries and supermarkets; restaurants, takeaways, pubs and bars; petrol and diesel; and purchases from premium rate websites and phone lines.

It is available to all those who have a Barclays debit card, and soon will be available to those with credit cards. Although the bank has said that the tool was designed with the protection of vulnerable consumers in mind, it is available to all users.

The Barclays spending blocker will cancel payments made to specific companies and retailers by identifying the merchant category codes. This could help problem gamblers by stopping them accumulating so much debt that they lose their home or further endanger their mental health.

Earlier this year, former gambling addict Danny Cheetham spoke to the BBC about how a spending blocker available on his mobile-only bank helped him recover from a gambling addiction. The Monzo app takes 48 hours to remove a spending block, and can also put a cash-withdrawal limit on users’ accounts. The Monzo CEO, Tom Blomfield, told the BBC that the bank had seen a 70% fall in gambling transactions in the four months after it was launched.

Barclays launched its new tool after facing pressure from the Royal College of Psychiatrists, mental health charities and the money expert Martin Lewis.

The tool can be used in conjunction with the Gambling Commission’s recommended methods for controlling the time and money which consumers spend on gambling, which includes setting limits on gambling machines, setting time-outs on online gambling sites, and asking for self-exclusion from gambling premises and online sites.

It remains to be seen whether a similar tool will be adopted by the other four major big street banks in the UK; HSBC, RBS, Lloyds, and Santander.

Gambling and Debt

The Gambling Commission’s 2017 survey of 4000 adults in Scotland found that:

  • 0.8% of respondents identified as problem gamblers
  • 63% of respondents had spent money on at least one gambling activity in the past year (a fall from 66% in 2016)
  • 46% of respondents had spent money on at least one gambling activity in the past year, excluding those who had only played the national lottery

These results were slightly different from those of the Commission’s survey in England:

  • 1.2% of respondents identified as problem gamblers
  • 56% of respondents had spent money on at least one gambling activity in the past year
  • 42% of respondents had spent money on at least one gambling activity in the past year, excluding those who had only played the national lottery

The Gambling Commission also made clear that the harm arising from gambling can include debt problems, higher levels of physical and mental illness, relationship breakdown and, in some cases, criminality.

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Is Personal Debt getting in the way of your life goals?

Whether it is the application for a mortgage, a new car, the cost of further studies or a business start-up, personal debt can severely impact on your goals and prospects as lenders measure up your application. Strategic financial advice when weighing your lending options against your wider commitments can help you reach your long-term aims faster.

Economic Impact

The impact of personal debt on the economy is manifold, but shapes the terms of your loan and wider economic prognoses of the lenders.

With household debt to GDP anticipated to reach 88.50 % by the end of the third quarter (Trading Economics), additional financial stresses for the winter season may negatively impact the turnover of businesses in the fourth quarter.

While government research notes that ‘growth in total debt is still low compared with pre-recession rates’ (Research Briefing, 2018), nonetheless, debt remains at a high level against historic trends. Highlighting a rise of 8.6% of unsecured debt, consumers require a clear perspective of their liabilities and interest rates, in step with their household income.

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Cost of over-indebtedness

The Money Advice Service (MAS) estimates that 8.3 million people in the UK are over-indebted and that 22% of UK adults have less than £100 in savings, making them highly vulnerable to a financial shock such as job loss or large unexpected bills. The National Audit Office (NAO) also reported that:

  • £18 billion estimated minimum value of personal debt is owed to government, utility companies, landlords and housing associations; and,
  • Approximately 5,000 consumer credit lenders are regulated by the Financial Conduct Authority.

Personal debt can hinder your aspirations for individual, and business ventures, and may even restrict your choice of career. Find out what we can do to put you back on track.

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Manage your investments

In the challenging climate of Brexit negotiations, targeted long-term investment choices might offer the security for businesses mitigating financial uncertainty. Foreign direct investments (FDI) have fared well according to the Ernst and Young (EY) report for 2018.

Financial Conduct Authority regulatory changes may impact on Scotland’s attractiveness to foreign direct investment

Leading in attractiveness ahead of the UK average, Scotland expanded on foreign direct investment particularly in the Research and Development sector over 2017. However, firms must keep alert to the regulatory requirements of foreign investors in light of changes over Brexit.

The Financial Conduct Authority (FCA) highlights measures for operators applying to become a recognised overseas investment exchange (ROIE), in case existing regulation under the Markets in Financial Instruments Directive (MiFID) II serving the EEA financial market ceases to be recognised post-Brexit. This may directly impact the likelihood of securing a favourable deal with foreign investors in securing the liquidity of the business.

Ernst and Young Scotland Attractiveness Survey 2018

Nevertheless, the EY survey highlights positive potential for Scotland in the year ahead, summarising their findings with:

  • A new record for FDI projects in 2017 for the third consecutive year with an increase of 7% compared to 2016;
  • Scotland secures its position as the most attractive location in the UK for R&D projects for a second consecutive year with an increase of 70% compared with 2016;
  • The digital sector experienced a 56% increase in FDI projects and was the second largest sector to attract investment into Scotland behind business services;
  • Manufacturing activity experienced a 25% increase of FDI in 2017 compared to 2016;
  • 2nd place ranking, behind London, as the most attractive place to invest in the UK; and,
  • FDI job creation increased by 104%, from 3,131 to 6,374.

Effective risk management and business review can support the best-suited investment portfolio to steer your business through hard times.

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