A return to pre-Covid levels of corporate insolvencies has yet to significantly affect the transport sector but the “tides are turning” as haulage businesses face further challenges around fuel costs and Brexit, according to Atradius Ireland.
Just 4 per cent of the businesses entering liquidation in the first half were in the transport sector, according to Atradius, but that is expected to increase in the final six months of the year.
“Great resilience” has been shown by the Irish transport sector in recent times, said Sheena Bohan, head of commercial at Atradius Ireland, reflected in the low level of corporate insolvencies. “However, the tides are turning, with businesses forced to navigate challenging conditions.”
Figures from Deloitte published last month pointed to a 30 per cent increase in overall business failures in the first half of the year compared with a year earlier. While slightly below 2019 levels, the spike in insolvencies – from a low base between 2020 and 2022 – marked a return to more normal levels from the era of Covid business supports, which artificially lowered the rate at which companies went out of business.
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In its August transport sector report, the Irish arm of the Amsterdam-headquartered debt collection and credit insurance company said that the Republic’s transport sector had proven “remarkably robust” but the sector would face fresh challenges over the coming months. “This is partly due to constant fluctuations in fuel prices, significant labour shortages (particularly for large goods vehicle drivers) and increasing interest rate charges which has led to an increased cost base,” it said.
Weakening consumer sentiment across Europe is another threat to the industry as the European Central Bank continues its fight to return inflation to 2 per cent annually. This is leading to “a slowdown in demand, particularly from ecommerce providers”.
An increase in Brexit-related red tape for EU exports to Britain will also present challenges, the company said. Once the UK government implements the new controls in October all imports of animals and foods of animal origin will have to be subject to pre-notification and will require a health certificate.
“There is also likely to be new physical checks at the UK border from January, adding to both costs and delays for the sector,” Atradius warned.
“The next six months will be crucial for many businesses,” said Ms Bohan. “As the transport sector is typically heavily reliant on credit, we are likely to see that smaller firms, or firms with a smaller customer base, may struggle to remain solvent.”
She said businesses should start to prepare now for the UK’s new import requirements and work to implement changes to their export processes given the expected increase in waiting times as businesses adjust.
