Companies in Scotland’s construction sector have seen significant rises in the most serious signals of business distress since the first quarter of 2017, according to new data released by business rescue and recovery specialist Begbies Traynor.

The quarterly Red Flag Alert data shows that in April, May and June ‘critical’ business distress, which fell by 1% on average across the UK, was up by 33% in the Scottish construction sector with a 31% year on year rise in the less serious but more common ‘significant’ distress levels.

These instances of ‘critical’ business distress, the indicators of the most serious problems, include decrees totalling over £5,000 and winding-up petitions.

Concerns were raised that large civil engineering projects including the Forth Road Bridge, M8 extension and Raith Interchange works, which are finished or are nearing completion, have been disguising the true state of the industry in Scotland for the last few years.

The Red Flag Alert statistics follow the latest ONS data for the UK construction sector that also reported housebuilding, infrastructure and commercial construction outputs were all down during May.

‘Critical’ business distress across all sectors was up by 27% in Scotland since the first quarter of 2017. In total, Scottish firms showed 61 instances of ‘critical’ business distress in the latest period of 2017 (up from 48 three months earlier) and ‘significant’ instances totalled 17,102 up from 15,086 when the data was last reported in April.

Ken Pattullo, who leads Begbies Traynor in Scotland, said: “The latest GDP figures showed a modest increase here in Scotland, bucking predictions of a Scottish recession, but falling car sales, the completion of a number of large construction infrastructure projects and stagnating wages reducing consumer spending are all factors that are coming through to influence the latest data.

“The sectors hardest hit were automotive, construction and financial and professional services, but there was distress in almost every area of the economy and these early warning signs are very concerning. The fragility of the economy is becoming evident with the potentially seismic changes in policy around Brexit and the impact this has on foreign trade and exchange rates, and little has become clearer after the General Election. We rarely see such large increases in distress right across the spectrum of business in Scotland, and the whole UK, and it is never welcome news.”