Company collapses up by 20% to 160 a month


COMPANIES COLLAPSED at a rate of more than 160 a month in the first 11 months of last year, with the rate of failure increasing 20 per cent on 2010, according to a business information provider.

From January to November, some 1,930 Irish companies failed, with almost three-quarters of the companies liquidated and most of the rest going into receivership. The failed companies owe a total of almost €1.2 billion in unpaid debt to unsecured creditors, Vision-net said.

Businesses in the hotel and restaurant sector were the hardest hit. Some 3,400 of the 5,000 companies in this sector studied by Vision-net – almost 70 per cent – were deemed “high risk” by the business analyst. Some 181 companies in this sector closed last year, accounting for nine per cent of total business failures.

More than half the construction companies examined and more than half the companies in the wholesale and retail sector were also deemed to be “high risk”, showing signs of business failure, according to Vision-net.

Christine Cullen, Vision-net’s managing director, said the hospitality and construction sectors had been hardest hit because of the squeeze on consumers’ discretionary spending and the ongoing contraction in the property market.

Separately, the Small Firms Association has warned that urgent Government action needs to be taken in order to restore confidence to a “fragile” labour market.

“The outlook for job creation is weak and will remain slow until growth occurs in the economy,” said assistant director Avine McNally in the small business group’s new year jobs statement.

The SFA wants the Government to review changes to the rules governing statutory redundancy rebates so that small businesses, forced to make some redundancies in order to survive, are not obliged to pay the same percentage as larger enterprises that make strategic decisions to shift business out of Ireland.

“Otherwise, there is a real concern that many more jobs may be lost,” she said. In Budget 2012, the Government cut the redundancy rebate to employers from 60 per cent to 15 per cent of the payment.

Ms McNally also said a labour market “mismatch” prevailed, with significant skills shortages in some areas such as IT coupled with an oversupply in other areas.

“The task the Government faces in reskilling and retraining is daunting, but necessary, if Ireland is to avoid a long period of structural unemployment,” she added.

Job creation was being hampered by rising business costs, economic uncertainty and limited access to credit, she added.

However, despite the rising rate of business failures, Vision-net’s figures reveal that some 14,439 new firms were incorporated in the first 11 months of 2011 – up five per cent on 2010. Some 26,154 business names were registered – 65 per cent of them by individuals, 25 per cent by companies and the remainder by partnerships.

Ms Cullen said the increase in the number of newly created companies last year suggested that “entrepreneurship remains a strong trait in the workforce”, despite weak consumer sentiment.

“But in a move that is likely to thwart economic recovery,” the Vision-net managing director added, “short-term unsecured creditors are still owed €1.19 billion which has serious knock-on effects for business cash flow, employment and consumer sentiment.”