The level of Irish corporate insolvencies dropped 38 per cent in the first six months of 2021, new figures show, as ongoing Government supports for businesses during Covid-19 conceal the extent of distress across many businesses.
Statistics published by accountants Deloitte show that 169 corporate insolvencies were recorded in the first half of the year, compared to 273 cases a year earlier, which itself was 12 per cent below the comparative period of 2019.
"The continued low level of corporate insolvency activity is likely to be influenced by the broad range of Government measures introduced to support businesses during the pandemic," said David Van Dessel, a partner in the financial advisory unit at Deloitte."
“The current crisis has created a significant challenge for many otherwise viable Irish companies and we anticipate that the first half of 2022 will paint a more accurate picture of how the Covid-19 pandemic has influenced the economy and the knock-on effect on our SME sector.”
The services sector recorded the highest number of corporate insolvencies in in the first half, at 73, representing 43 per cent of total during the period. Within that, financial services experienced 51 insolvencies, while education had four collapses and two sporting activities businesses ceased trading.
The construction sector recorded 31 insolvencies during the first half – a 15 per cent increase on the year.
The retail sector recorded just 20 insolvencies, down 61 per cent. “Leaving aside this particular snapshot, we continue to see significant change in the retail sector as a result of the pandemic, with store closures continuing to accelerate e-commerce activity and the associated shift in consumer behaviour,” Mr Van Dessel said.
Hospitality insolvencies fell by 65 per cent to 17 cases. “Hospitality has been one of the hardest-hit sectors by the pandemic, including of course the restaurant and pub sector who continue to rely on outdoor dining,” he said. “While mobile ordering and takeaway have been widely adopted by many restaurants, some may fail to reopen their doors. With these areas particularly vulnerable to ongoing government lockdown measures and restrictions, as we have seen in recent days, we may see increased levels of failures, particularly after the cessation of Government subsidies.”
Advice for business
The number of examinerships, aimed at averting a business collapse, has remained very low, with just three appointments, down from seven a year earlier. Mr Van Dessek said that the imminent introduction of a so-called “examinership-lite” regime to make it easier for SMEs to go down this route will mark “a new age” for small-business rescues.
“As part of this process, directors maintain control of the business and the process can be commenced and completed without need for a court application,” he said.
“We would advise any business in difficulty to ensure you keep your creditors informed; maintain proper books of account and regularly review the financial performance of the company by preparing management accounts on a regular basis; and, perhaps most importantly, seek professional advice at the earliest opportunity to ensure you have sufficient time to plan and implement a robust recovery strategy.”