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The number of businesses failing in Scotland has fallen in the past year but "clouds remain on the horizon", according to a report.

Professional services firm KPMG found insolvencies fell by 7%, to 867 over the 12 months to June.

The figures showed a 7% drop in liquidation appointments, which tend to affect smaller businesses, and a 6% fall in administration appointments.

KPMG said it marked "an encouraging sign" for Scottish companies.

The latest quarter to the end of June showed a year-on-year fall of 27% in the total number of insolvencies.

Blair Nimmo, head of restructuring for KPMG in the UK, said: "The statistics reflect our experience on the ground.

"Oil and gas has come through a very difficult period and in order to survive many businesses in the sector have drastically changed their operating models and cut costs significantly.

"This has put them in a stronger position and, along with the support of their stakeholders, they continue to navigate through what is still a challenging period."

He added: "Looking to the future, clouds remain on the horizon.

"The likely impact of Brexit is yet to be seen and the recent election has undoubtedly introduced greater uncertainty and may have had a negative effect on consumer and corporate confidence.

"Inflation is on the increase and interest rates may be about to rise, while adverse exchange rate movements could also be starting to impact on some sectors, with businesses expressing concern over their ability to pass on additional costs to their customers."

Meanwhile, research by insolvency and restructuring trade body R3 has indicated that firms in Scotland have the lowest levels of insolvency risk of anywhere in the UK.

R3's insolvency risk tracker found that, in July, 21.8% of Scottish companies were at heightened risk of insolvency, against a UK average of 27.3%.

However, the Scottish figure was 1.6 percentage points higher than in April.

Pubs and clubs in Scotland performed strongly, showing the lowest risk of insolvency of anywhere in the UK. However, hotels showed the fourth highest risk of 12 UK areas.

Scottish retailers had the second-lowest level of insolvency risk of all parts of the UK.

Meanwhile, 36.9% of Scotland's oil and gas extraction companies were found to be at higher than usual risk - slightly down on June's figure.

Tim Cooper, chairman of R3 in Scotland, said: ""Overall, July's results show cause for some cheer, along with a strong dash of caution.

"With uncertainty in the air, no business should be complacent."