Pent up distress puts Scottish businesses on high alert

There are still high levels of post-Covid financial instability across Scottish businesses, even though the predicted ‘tsunami of insolvencies‘ hasn’t yet happened.

That’s according to Henderson Loggie’s head of business recovery and insolvency Shona Campbell, whose team is at the coalface of trying to save companies across many sectors of the economy.

A combination of government support and creditor forbearance during the pandemic has kept many going, but continued weak trading and too many employees are making the numbers not add up.

“There are still a lot of businesses in distress, but a frustration around people not wanting to speak to liquidators – they see it as an admission of defeat, when it’s really about getting advice and understanding what the options are,” she explained, adding that early intervention can help manage communications with creditors, pull the right financial levers, possibly access additional funding or dispose of certain assets.

“The most likely outcome is not an immediate insolvency appointment,” added Campbell.

In Scotland, about one in five insolvencies in recent years has been in the hospitality and leisure sector, with a similar number being construction industry related.

“That trend has continued, with a lot of the latter at the moment – be it contractors, builders, architects – there are cashflow problems across the sector.

“Often businesses have solid debtor balances – that’s not disputed – but they just can’t pay because of their own cash flow constraints.”

May’s data from Accountant in Bankruptcy showed 118 company insolvencies registered in Scotland – 22% higher than during the same period last year – made up of 71 creditors’ voluntary liquidations, 43 compulsory liquidations and four administrations.

“I’m surprised there’s not been more distress, given everything I’ve said about Covid backlog, rising costs, inflation, etc,” noted Campbell.

At the start of this year, Campbell took over as chair of Henderson Loggie, when predecessor Alan Davis stepped down after an eight-year tenure.

She is also convenor of the Institute of Chartered Accountants in Scotland’s Insolvency Committee, which oversees industry standards and liaises with Westminster and Scottish Parliaments on proposed changes to legislation.

But 25 or so years ago, she was less sure about the direction of her career.

“I was the first in my family to go to university, studying law at Glasgow,” recounts Campbell. “During uni I got a placement at Shell Step into Tech in Aberdeen, working on confined space training.

“Turned out that their finances were in a mess, so with no real knowledge of accountancy I put in a system for invoicing and recording the training that they did – the business owner thought i was best thing since sliced bread and it felt rewarding to actually make a difference – so I though ‘this is what I want to do’, but didn’t know how to do it.”

She dropped the law and took on a chartered accountancy qualification through training.

“A careers advisor said there was too much demand, but I did it anyway during third year and got a job at Deloitte when I graduated in 2002, within audit and assurance,” Campbell explained, although again, being an auditor wasn’t the right career fit, so she went into reorganisation services.

“Deloitte were working on a lot of big national projects, and I found I preferred working with owner-managed businesses, as there was more of a direct impact, so I then moved to KPMG in 2012,” she stated, before moving on to her next chapter, joining Henderson Loggie in 2018.

“It’s now been six years since I joined, and it was a small team at that point, so we’ve grown to 10 staff on the insolvency side.

“I became a partner 2020 and then at the end of last year, the chair role came up – I suppose a bit of impostor syndrome meant it didn’t cross my mind at first, but with the encouragement of several colleagues I decided to go for it.”

Getting the job means Campbell is unable to be quite as hands on as before, but she’s relishing the opportunity to work on the firm’s growth strategy.

“We’ve just had our best ever year at Henderson Loggie, so it’s quite an exciting time, we’re up to 18 partners and 190 staff in total,” she said. “And we’re very much a people business, so I’ve been working on things like bringing in a new appraisal system and behavioural framework in, as we want people to enjoy their work more.

“But it’s also about things like bringing on staff within Generation Z – apparently their expectation is to only stay for an average of two years, so we’re trying to help lengthen that.

“We’ve got an agile working policy, the preference is to be in the office because we’re a training firm, with a lot of junior staff, but it’s also important to offer flexibility in this jobs market.”

She’s also proud of the fact that 57% of the firm’s staff are female, and in terms of partner group, it’s a pretty even gender split. “We’re also quite unusual in that the age cohort is spread pretty evenly demographically.”

Alongside organic growth, Campbell doesn’t rule out potential deals.

“There are certainly opportunities in the market, a lot of consolidation and change out there, so I see real possibilities for us to grow in the central belt – I’ll never say never on acquisitions – and being independent means we can move quickly when the right things arise.

“Although, having said that, it’s a lot easier to pass culture on one person at a time, than to a whole other organisation – organic growth is the preference.”

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