According to Deloitte, corporate bankruptcies will increase by a third this month compared to the first nine months of 2022

According to a forecast by accounting giant Deloitte, the number of corporate bankruptcies will increase by a third by the end of this month compared to the first nine months of 2022.

The growing level of financial distress has already led to a sharp rise in the use of the Small Company Administrative Rescue Process (Scarp), the new audit-style rescue program for companies at risk of bankruptcy.

Recent high-profile cases of businesses using Scarp include the companies behind chef Dylan McGrath’s Rustic Stone and Brasserie Sixty6 restaurants, both of which have appointed Neil Hughes of accounting firm Baker Tilly to advise on the process that can enable businesses to act through difficulties and emerge with them reduced debts.

In the broader economy, mounting financial distress is mirrored by rising inflation, interest rate hikes and rising energy costs, all of which are expected to add further pressures on businesses.

The service sector is expected to account for the highest proportion of insolvencies.

According to Deloitte, the total number of corporate bankruptcies forecast in Ireland for the first three quarters of 2022 is 378. That is almost a third more than the 278 bankruptcies recorded in the first nine months of 2021, including the end of the Covid pandemic and the final shake off of lockdowns.

Bankruptcy experts have long forecast a delayed wave of Covid-related bankruptcies in late 2022 as the benefits of government supports, tax warehouses and loan repayment pauses, all introduced during the lockdown, wear off.

According to David Van Dessel, Financial Advisory Partner at Deloitte, this is happening now.

“Based on current levels and trends in bankruptcy activity, it now appears that the previously forecast wave of bankruptcies is becoming a reality,” he said.

From Jan. 1, interest will accrue on most of the €2.8 billion in debt “stored” by Revenue, he added.

A new factor that wasn’t a feature at the end of the pandemic is pressure on household finances – which is expected to result in lower spending, he said.

“Consumers who are impacted by inflation and interest rate hikes may also reduce their discretionary spending, further adding to downward economic pressures,” Van Dessel said.

Companies that are already struggling need to consider their options at the earliest opportunity, as early action is a key factor in successful turnarounds, he said.

https://www.independent.ie/business/irish/deloitte-says-business-insolvencies-will-be-up-a-third-this-month-compared-with-first-nine-months-of-2022-42010897.html According to Deloitte, corporate bankruptcies will increase by a third this month compared to the first nine months of 2022

Fry Electronics Team

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