The first half of the year saw a 25% increase in corporate bankruptcies, as indicated by two independent studies, demonstrating a consistent rate of commercial collapses. However, the PwC Insolvency Barometer highlighted a decrease in this trend during the second quarter, showing a 15% fall compared to the initial three months of the year.
According to statistical data from PwC and a distinct report from Deloitte, over 400 entities went insolvent within the year’s first six months, marking an increase from 331 in 2023. This surge in insolvencies broke down to 223 in the initial quarter and 188 in the subsequent quarter, signifying a 10% year-on-year increase.
This increasing trend translates to 29 insolvencies for every 10,000 businesses, which is notably higher than the 14 per 10,000 businesses recorded in 2021. The highest insolvency rates were observed in 2012, clocking in at 109 per 10,000 businesses.
The cessation of the Revenue’s Debt Warehousing scheme back in May hasn’t yet shown a considerable impact on insolvencies. Approximately 93% of the €3.2 billion debt under the scheme has been either paid or is under repayment arrangements. Enforcement and collection procedures will address the remaining yet unresolved debt of around €100 million from more than 7,000 businesses.
“The success of the debt warehousing scheme during uncertain times is validated by the significant number of participating businesses either engaging with Revenue or clearing their debts,” says James Anderson, Deloitte Ireland’s Turnaround & Restructuring Partner.
The largest numbers of insolvencies during the first half of the year were noted in the retail, hospitality and construction sectors. Meanwhile, SME liquidations comprised 83% of insolvencies in the second quarter. Hospitality witnessed a rate of 17 insolvencies per 10,000 enterprises, compared to 7 for retail and 6 for construction.
The forthcoming mandatory pension scheme this September, accompanied by the growing cost of living, may pose further challenges to some sectors.
The Insolvency Barometer by PwC indicates that although the annual insolvency rate is stable, there are indications it could rebound to levels seen prior to the COVID-19 pandemic. Despite a flourishing economy, strong fiscal revenue, near-total employment and declining inflation, the insolvency rate is still fairly low, notably under the long-term average. However, Ken Tyrrell, Business Recovery Partner at PwC Ireland, noted that some customers continue to worry about their individual financial stability and are maintaining a frugal approach to spending.
The previous six months have shown a depressed occurrence of rescue processes, with only six examinerships and 14 SCARPs recorded. Data from Deloitte revealed a decrease in SCARP appointments compared to the previous year, a trend the firm finds alarming.
The SCARP scheme, known for its role in preserving jobs, continues to draw only a small pool of companies despite the positive influence it has shown on those who utilise it. Deloitte is therefore encouraging the government to invest more in promoting the benefits of this programme. Since its introduction at the close of 2021, SCARP appointments have reached a total of 68.