Borrowing puts Scottish firms at risk

A third of Scotland’s top 500 companies are putting themselves at high financial risk because of their levels of borrowing to fund investment. That’s the view of business analysts Plimsoll Publishing.


A third of Scotland’s top 500 companies are putting themselves at high financial risk because of their levels of borrowing to fund investment. That’s the view of business analysts Plimsoll Publishing.


Plimsoll, which independently monitors company performance in the UK, France and Japan, and has a track record of predicting commercial trends, says rising interest rates are posing a challenge, and a slowdown in growth could affect the ability of some businesses to repay their debts.


 “On the surface, the Scottish economy has never looked so bright. The market is growing at a rapid pace, and last year was the third successive year that average sales growth in the top 500 companies outpaced the rest of the UK. But financing that growth is where the weakness appears. We have awarded 161 of the top 500 a financial danger rating. Total debt as a percentage of sales is rising, and now stands at 17%. This is substantially above the UK average and way above the picture in France,” said senior analyst David Pattison.


According to Plimsoll, all it takes is a slowing down of growth for certain high borrowing firms to be at serious risk. The loss of one major contract, for example, could be the weight that breaks the tightrope.


The best performing sectors include electrical and general engineering (18.2% average growth) and service industries (16.6%). The construction sector was next on the list, at 9.2% – a figure that compares with Northern Ireland, which is enjoying something of an economic boom. Clothing saw a fall in sales of 0.9%, while the agricultural industry was almost static with growth of 0.6%.


“Using outside finance is, of course, a great way to develop your business. But a balance needs to be struck. What our report looks at is how companies strike that balance between commercial gain and the right amount of financial risk. Essentially, we have produced a barometer of the Scottish economy, benchmarking each company’s strengths and weaknesses,” added Pattison:


The analysis highlights those growing the fastest, those best to do business with, and those taking the most risk.


Copies of the report are available for £500 by calling Clair Sherwood on 01642 626422 or e-mailing enquiries@plimsoll.co.uk and quoting the reference SC01.