When the City disappeared off on holiday last summer the words "credit crunch" were not part of our everyday vocabulary – how things have changed. Lack of confidence in the financial markets and the lack of availability of credit have had a severe impact on the economy of the UK. But how has this affected the restructuring and insolvency profession in Scotland?

Like the rest of the UK, Scottish business is having to cope with the inflationary pressures of energy and transport costs and a slow down in consumer confidence. The last twelve months have seen a number of well known Scottish businesses get into financial difficulty. No sector has been immune with transport (Zoom Airlines) and property (Watson Construction and estate agent Stewart Saunders) probably finding themselves hardest hit.

The biggest change for restructuring and insolvency professionals over the last twelve months has, however, been the lack of availability of finance (or at least finance at the right price) to enable businesses in financial difficulty turn the corner. Administration was introduced with the aim of rescuing a business but increasingly we are seeing that when the end of the road comes, rescue is simply not an option without being able to access new money.

The downturn in the property market is also causing ripples into the wider economy. Property has always been a major secured asset to which lenders would resort in the event of failure. It now seems likely that shortfalls on secured lending will increase and indeed there will be judgements to be made in some cases as to whether secured property assets can be exposed to the market at all at this time given the risk of flooding the market with yet more property causing the price to fall further. Mothballing business assets may be one way around the current problems for lenders. Directors are increasingly going to require advice on how to deal with the impact of the current situation on their business and more companies are going to be looking to protect themselves against the potential failure of their customers or tenants.

Paul Hally is a partner specialising in restructuring and insolvency law at leading UK law firm Shepherd and Wedderburn LLP.

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