Liquidation rate at 20-year low

The number of company liquidations dropped to its lowest level in 20 years in 2006, underlining the continued buoyancy of the economy.

However, many new entrants into the construction sector struggled to remain afloat, with the sector featuring prominently in last year's insolvencies.

A total of 280 companies went into liquidation last year, almost 11 per cent fewer than in 2005.

This compares favourably to the UK where more than 20,000 companies were liquidated in 2006, the highest level in a decade.

However, Liam Reddy, director of Experian Ireland's business information division - which compiled the Irish figures - warned there was no room for complacency.

"The number of companies which went into examinership in 2006 doubled [ from four in 2005 to eight in 2006]," Mr Reddy said. "And there was an increase in the number of companies entering receivership, up from 14 to 16."

The Revenue Commissioners petitioned for the winding up of 56 companies last year, a slight decrease from 61 petitions in 2005.

According to Mr Reddy, the construction sector was hardest hit in 2006, with 30 per cent of all corporate failures occurring in this area.

The majority of these involved companies registered within the last seven to 10 years.

"The construction sector has been very strong in recent years, attracting a plethora of new companies anxious to share the spoils, but it is a very tight margin business."

The highly-competitive tendering process was forcing smaller, newer construction companies out of business, Mr Reddy said, whereas more established businesses tended not to feature in the liquidation statistics.

The catering and food-licensed premises sector also had a difficult year, with 36 insolvencies recorded.

This represents 13 per cent of all insolvencies which occurred during the year.

A combination of higher fuel prices and more intense pricing competition put pressure on the transport sector, which accounted for 5 per cent of all insolvencies in 2006.