Bankruptcies rise 29 percent as companies grapple with economic headwinds

According to a Deloitte report, over 500 corporate bankruptcies have been registered in Ireland so far this year. This is an increase of over 29 percent over the same period last year, when the number of recorded corporate bankruptcies reached 401.

The service sector was hardest hit, with 219 registered bankruptcies, accounting for 44 percent of the total.

This stayed consistent with last year, with this sector accounting for 42 percent of all bankruptcies in 2021.

Financial services and real estate were among the hardest-hit companies in this sector, with 117 bankruptcies registered in these categories.

Health, fitness and beauty companies followed, with 36 bankruptcies filed so far this year.

Hospitality accounted for 11 percent of all bankruptcies, affecting 56 businesses. The number of insolvencies in this area has risen by 81 percent compared to the previous year.

“While government support gave many companies in the industry a lifeline during the Covid era, changing patterns in consumer behavior, escalating energy costs and difficulties in recruiting and retaining employees left some unable to survive,” said David Van Dessel, partner of Deloitte.

The construction industry followed with 50 bankruptcies so far this year. However, this was a decrease from the 69 bankruptcies in the previous year.

The report noted that this was “surprising” given the rising cost of materials.

According to Deloitte, almost three-quarters of corporate bankruptcies involved Leinster-based companies, a 45 per cent increase from 2021.

The remaining provinces have seen a slight decline in bankruptcy activity so far this year.

The report added that the majority of bankruptcies were voluntary liquidations by creditors, with 72 percent falling into this category. This number now contributes significantly to the overall increase in insolvency activity.

The newly launched Small Company Administrative Rescue Process (SCARP) was used by 22 companies, accounting for 4 percent of the total. SCARP allows SMEs to continue trading while negotiating with creditors to write off existing debt and restructure.

So far, eight companies have completed the process, three have failed, resulting in the loss of 61 jobs. 10 remain active.

Van Dessel pointed to the higher cost of living, lower discretionary spending and the impact of inflation.

“So there are a number of factors that lead to financial hardship for struggling companies before the stored taxes have to be repaid, which is scheduled to start between December 2023 and spring 2024, depending on the specific circumstances of the debtor,” he said.

https://www.independent.ie/business/irish/insolvencies-rise-by-29pc-as-businesses-battle-economic-headwinds-42212820.html Bankruptcies rise 29 percent as companies grapple with economic headwinds

Fry Electronics Team

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