The number of corporate insolvencies forecasted for the first nine months of the year is up by over a third on the same period of last year, according to business consultancy Deloitte.
The increased rate of insolvencies comes as rising inflation, higher interest rates and spiralling energy costs place increased pressure on businesses here.
Deloitte’s report indicated that 378 businesses are set to have become insolvent over the period between January and the end of September, compared to 278 over the same nine months a year ago, representing a year-on-year increase of 36 per cent.
On a quarterly basis, 125 corporate insolvencies are forecasted for the third quarter of 2022, based on 83 insolvency events in July and August. The services sector is projected to account for the highest proportion of corporate insolvencies by the end of the third quarter with 195 insolvencies, representing 52 per cent of total insolvencies recorded so far this year.
Within the services sector, financial services companies account for the highest incidence of insolvencies with 77, representing 20 per cent of the total. Geographically, the highest number of projected corporate insolvencies year-to-date was recorded in Leinster, with 74 per cent (282).
“Based on current insolvency activity levels and trends it now appears that the previously forecasted wave of insolvencies is becoming a reality,” David Van Dessel, financial advisory partner at Deloitte, said.
“While businesses will be hopeful of Government support being announced in the upcoming budget, we advise those already struggling to consider their options at the earliest opportunity, as early action is a key factor in successful turnarounds,” he said.
“Rising inflation, higher interest rates and spiralling energy costs are likely to increase pressure on businesses over the coming months. In addition, consumers impacted by inflation and interest rate increases may also reduce their discretionary spending, further exacerbating downward economic pressures,” Mr Van Dessel said.
Deloitte’s report noted that as in previous years the Creditors Voluntary Liquidation process currently accounts for the majority of corporate insolvencies, projected to reach 259 by the end of the third quarter, representing just under 70 per cent of the total.
The report also detected a sharp increase in uptake of the Small Company Administrative Rescue Process (SCARP) in August, with six SCARP appointments in August alone, taking the total number of SCARP’s this year to 10.