Business

Nearly 60% increase in SME liquidations in the last three months

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Small businesses can access government-backed loans of up to €1.5 million from today as figures show business failures in the sector are skyrocketing.

Acquisitions by small and medium-sized companies are up 58 percent in the last three months compared to the first quarter of the year, according to a survey by consulting firm PricewaterhouseCoopers (PwC).

Overall corporate defaults rose 14 percent quarter-on-quarter, PwC said in its latest restructuring update, and up 18 percent in the first half of this year compared to the same period in 2021.

Many companies received government support in 2020 and 2021, with the wage subsidy scheme only ending in April. As a result, corporate bankruptcies were at an all-time low last year.

In the UK, where support ended last fall, the liquidation rate is almost four times higher than here, PwC said.

Insolvencies in Ireland were highest in the healthcare and energy sectors when comparing the first two quarters of this year.

The default rate for the hospitality industry also rose quarter-over-quarter, but remained at “relatively low” levels, PwC said.

In the travel and transportation, arts, entertainment and recreation, and real estate sectors, the number of busting companies declined quarter-on-quarter.

But corporate failures are at historic lows.

Overall, 4.2 out of 10,000 companies went bust in the second quarter, compared to a 17-year average of 39.

PwC says that rate is likely to rise in the second half of the year and into next year, especially as tax debt – nearly €3 billion of which is still “parked” in a government storage system – has to be paid off from January.

“The corporate failure rate remains at an all-time low, but clouds are on the horizon,” said Ken Tyrrell, Business Recovery Partner at PwC Ireland. “We are now seeing the number of business failures increasing slowly but steadily, albeit still from very low levels.

“It remains to be seen how long these organizations, which are under financial pressure in Ireland, can stay in business.”

Figures from consultancy Deloitte last week showed bankruptcies rose 50 percent to 253 in the first six months of 2022 compared to the first half of last year, a fifth below pre-pandemic levels.

It turns out that retail, hospitality and construction companies have so far dodged the surge in post-Covid bankruptcies thanks to an ongoing boom in demand, while finance and real estate companies are feeling the heat.

The news comes as the government introduces a new low-cost loan scheme for SMEs.

It replaces the Covid-19 loan guarantee scheme that was closed at the end of June when the relaxed EU state aid rules expired.

It had provided €730.2 million in financing to more than 10,000 small businesses in Ireland.

“This successor scheme will give SMEs, including farmers, fishermen and food companies, the opportunity to access truly competitive loans, in addition to the other support available, should they need to take up this option,” said Tánaiste Leo Varadkar.

Businesses can access loans ranging from €25,000 to €1.5 million over one to six years through the scheme, which is operated by the Strategic Banking Corporation of Ireland (SBCI) and backed by the European Investment Bank.

https://www.independent.ie/business/small-business/almost-60pc-increase-in-liquidation-of-smes-in-last-three-months-41810558.html Nearly 60% increase in SME liquidations in the last three months

Fry Electronics Team

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