The corporate bankruptcy rate in Ireland remains at a record low, but there are signs of a rise on the horizon, according to a report by accounting and advisory group PwC released this morning.
In the year to date, more than 350 companies have filed for bankruptcy with associated outstanding debts of over €1.6 billion.
The current business failure rate is currently 18 per 10,000 businesses in the year to June.
The average rate over the past 17 years has been 53 per 10,000 companies.
In 2012, that rate peaked at 109 per 10,000, while in 2021 that figure was 14 per 10,000.
Despite historical lows, PwC estimates that the direct economic damage from business failures in Ireland could still exceed €2 billion by 2022.
However, the group warned that the direct economic damage could rise to 6 billion euros if companies continue to face mounting economic challenges in the coming months.
Ken Tyrrell, PwC’s Business Recovery Partner, said that despite the support introduced in the budget last week, companies are currently facing a number of difficulties in the form of rising inflation, interest rates and energy costs this winter.
“In our view, many companies’ profitability and cash flow will continue to be under significant pressure during the winter,” he said.
“The focus should be on increasing performance and reducing costs.”
Business defaults rose 31 percent sequentially in the third quarter of the year. It also represented a 49 percent increase compared to the same quarter in 2021.
Companies in the arts, entertainment and recreation and hospitality sectors were particularly affected in the third quarter of 2022. Business losses in these sectors almost doubled in the third quarter compared to the second quarter.
PwC also reported that one in eight bankruptcies recorded last year was construction-related.
Dublin recorded the highest business failure rate in the third quarter, up 80 percent compared to the second quarter.
However, no business was lost in Roscommon, Cavan, Laois, Waterford and Sligo in the most recent quarter. As of July this year, 84,000 companies across Ireland were still using Revenue’s debt warehousing program for a total of nearly €3 billion, PwC
Mr Tyrell noted the importance of discussions with Revenue on restructuring this debt for companies in the coming months as many companies focus on addressing existing challenges.
“Companies will carefully consider whether, in addition to repaying historical debt such as
Earlier this year, PwC reported that over 4,500 companies were saved from bankruptcy due to the government’s Covid support.
The current liquidation rate in the UK is now three times higher than in Ireland. Data shows that for the year ending June 2022 the UK records a rate of 36,000 per 10,000.
The liquidation rate here was 12 per 10,000 for the same period.
https://www.independent.ie/business/irish/rate-of-insolvencies-are-set-to-rise-amid-significant-pressure-on-irish-businesses-according-to-new-report-42034317.html Insolvency rate set to rise amid “significant pressure” on Irish companies, new report says