Post-Covid insolvencies increase by 50 percent compared to 2021

But according to a study by consulting firm Deloitte, more than twice as many service companies – half of them in the financial services sector – have gone bankrupt this year compared to 2021.

But the number of corporate failures is likely to increase significantly from next year, especially as the government begins to withdraw its tax debt stockpiling program.

“Unfortunately, I expect Covid insolvencies to increase in the coming years,” said David Van Dessel, partner in financial advisory at Deloitte. “However, I don’t expect the ‘tsunami’ predicted by some other commentators thanks to the introduction of the debt stock.”

According to the latest earnings figures, 3 billion repayments are due from January.

“Although not all companies will be able to fully repay this debt, I believe this will result in a spread of bankruptcy activity over several years rather than a large, rapid increase,” Van Dessel said.

Troubled small businesses should use the state’s new fast-track bankruptcy scheme to help them get back on their feet, said Neil Hughes, managing partner at consultancy Baker Tilly Ireland.

Revenue and other creditors are likely to treat companies favorably under the program known as the Small Company Administrative Rescue Process (SCARP), he said.

Just this week, the IRS approved a 97.5 percent write-off on a small retailer’s tax debt.

“I’ve never seen anything like it,” said Mr. Hughes. “This is a seismic change in how creditors approach bankruptcy. You can expect Revenue to be very constructive about this.”

To date, only four companies surveyed by Deloitte have used the system.

Mr Hughes said companies should “take the bull by the horns” and enter the SCARP process to avoid liquidation.

According to Deloitte, 167 companies that classify themselves as service firms have gone bust so far this year, accounting for 66 percent of the total.

Of these, 84 were financial services companies and 33 were real estate companies.

In the case of external services, the construction industry was the second-largest group of insolvencies with 23 insolvencies.

But that number is down 26 percent compared to the same period in 2021, when there was a three-month partial shutdown of the construction sector. Retail and hospitality bankruptcies were flat or even down slightly from the first six months of 2021 after recording artificially low rates last year.

“There has been very generous government support that has been extended and very well timed so that it was not withdrawn until demand came back,” said Gerard Brady, chief economist at Ibec Group. “That probably explains the absence of the ‘tsunami’ of bankruptcies that many practitioners spoke of last year.”

According to Deloitte, 568 companies went bankrupt in 2019. The number rose to 575 in 2020 before falling to 401 last year. At the height of the financial crisis, there were more than 1,500.