Officials from the Department of Enterprise, Trade and Employment have stated that despite the recent deregulation of pandemic-era business supports, there has been no surge of corporate insolvencies as many anticipated. During a discussion with the Oireachtas Enterprise Committee, it was explained that their department does not gather data regarding the particular financial viability challenges pushing businesses towards adopting procedures like the Small Company Administrative Rescue Process (Scarp).
Scarp, a programme introduced in 2021 for small and micro businesses, aids in facilitating a simplified extrajudicial debt reorganisation for companies deemed viable, serving as an alternative to the more expensive examinership approach. Fiona O’Dea, principal officer in the commerce, consumer and competition section of the Department of Enterprise, informed TDs and senators that 62 small firms had used Scarp as of April 26th. Consequently, a considerable number of jobs have been safeguarded, O’Dea noted. Out of the total, only 10 companies failed to endure the process, according to information presented to the committee.
O’Dea stressed the importance of context, mentioning that insolvency and restructuring actions in general were increasing but remained under pre-pandemic levels. Simultaneously, there was a 50% increase in Scarp notifications in 2023, compared to its initial year of operation. The insolvency rate during the Covid-19 pandemic was kept lower than usual due to generous business support initiatives and other programmes, like the debt warehousing scheme. O’Dea mentioned that although business failure rates have begun to rise again, there’s not much evidence indicating a massive wave of insolvencies ahead.
O’Dea referred to the Central Bank’s financial stability review of 2023, which did not raise any concerns about increases in insolvency or impacts on SMEs. She mentioned that the review acknowledges that corporate insolvency has continued to climb from record lows, but this appears to relate mainly to companies that left the pandemic in a weakened financial state. It was also stated that the majority of companies that entered insolvent liquidation in 2023 had claimed wage subsidies during the pandemic.
According to officials, the department doesn’t maintain comprehensive details about the motivation behind companies seeking shelter under Scarp’s provisions. Recently, industry advocacy groups such as Ibec have brought attention to governmental labour market policies, asserting that the proposed implementation of a nationwide living wage by the start of 2026 may precipitate additional business closures and job redundancies.
Louise O’Reilly, Sinn Féin’s representative for enterprise, trade and employment, inquired if the department had collected similar insights from businesses engaging with Scarp, only to be informed that the department doesn’t procure such information from the insolvency practitioners tasked with creating a corporate rescue plan.
A single public servant stated that data collection proves challenging as it often contains commercially sensitive information. They noted that businesses are not always willing to publicly acknowledge their weaknesses or susceptibilities leading them to need rescue processes.
Independent MP Matt Shanahan, criticises the department for their perceived lack of understanding of the inner workings and dynamics of micro and small businesses, suggesting that such information should be collected and understood.