Changes are anticipated to the tax regime (at the time of writing it's thought that the income tax thresholds, national insurance on pension contributions above a certain threshold and changes to property taxes are the most likely candidates).
The Scottish budget will not be revealed until January 2026 but it's likely that any changes that come from the Autumn Statement will drive consumer behaviour over the festive period. Combined with continued pressures in retail and hospitality – particularly for mid-market operators still grappling with volatile inflation and changes to National Insurance contributions – this all points towards a potentially difficult trading period at what is a critical point in the year.
Mixed picture
Against this backdrop, the most recent set of Scottish insolvency statistics, released by the The Accountant in Bankruptcy (AiB) at the end of October, reveals a mixed picture for Scottish businesses.
The data reveals business insolvencies in Scotland numbered 298 in Q2 (July- September), down slightly from 313 in the same quarter in 2024 - a positive sign. Yet by contrast, Q1 data (April to June) showed corporate insolvencies up 17.3% year-on-year. The improved Q2 statistics are likely to reflect the decent summer weather and the increased levels of consumer spending that brings.
However, drilling down into the monthly data, the Insolvency Service’s commentary notes that, despite the overall quarterly drop, the number of insolvencies in September 2025 alone was 41% higher than in September 2024. Is this just a yearly variation or a warning sign of things to come?
The festive period and implications for Scottish businesses
The upcoming festive season - typically the busiest trading months for retail, hospitality and many service-led businesses - will play a decisive role in determining end of year outturn. For already distressed consumer-driven businesses, and particularly those in the retail and hospitality sector, the extent to which shoppers decide to loosen or tighten their purse strings will have a significant bearing on viability. Poor festive trading could well act as an accelerator for insolvency.
However, it's not only distressed businesses that need to be cautious. If disposable incomes are squeezed further, then consumers may scale back discretionary spending. Added to that are potential supply chain vulnerabilities: if key suppliers become distressed, tighten credit terms, or enter insolvency, even otherwise healthy businesses could face sudden disruption.
Of course, there is potential upside too. For businesses that have tight control of their stock, adapt staffing to suit their model, and negotiate favourable supplier terms there is an opportunity for a very favourable trading period. With consumer spend under pressure, businesses that deliver value, experience and engender loyalty may outperform their competitors.
What next?
With the festive period approaching, there is a real risk that already distressed businesses will take a critical hit if trading underperforms and costs remain elevated. At the same time, a strong festive trading window or timely policy change, such as a VAT cut or business rates relief, could moderate a rise in insolvencies.
For businesses in Scotland, particularly those in retail, hospitality or other consumer-driven sectors, the next few months will be crucial. Proactive planning, tight cost control, ensuring continuity of supply and early engagement with creditors will distinguish those businesses that can navigate the season successfully from those that unfortunately may fall into distress.
