More than 1,000 Irish businesses could go to the wall this year, costing creditors and others €3 billion-€4 billion, a report published on Monday warns.
Between one and two businesses fail every day in the Republic, according to some calculations. However, a new report warns that this could rise to more than 1,000 – almost three daily – this year, as the global recession bites more deeply in coming months. High inflation, soaring energy costs and rising borrowing charges will all hit profits and cashflows this year, driving up insolvency rates. The study calculates that this could cost to creditors and others €3 billion-€4 billion. Those totals could climb higher if bigger companies began to run into financial trouble, accountants believe.
The figures show that 527 companies went out of business last year, 39 per cent more than the 379 that failed in 2021, when many were still getting government Covid supports. Those businesses that failed in 2021 left their creditors with €1.8 billion in unpaid debts. The 10 biggest companies involved accounted for €900 million of those liabilities. However, last year’s failure rate was far behind longer-term trends, which point to about 1,000 firms going to the wall annually.
Insolvency closed 848 enterprises in 2019, the year before the pandemic struck, leaving many Irish businesses depending on taxpayer support.
Markets in Vienna or Christmas at The Shelbourne? 10 holiday escapes over the festive season
Ciara Mageean: ‘I just felt numb. It wasn’t even sadness, it was just emptiness’
Stealth sackings: why do employers fire staff for minor misdemeanours?
Carl and Gerty Cori: a Nobel Prizewinning husband and wife team
Accountant Ken Tyrrell noted that the financial crisis of the last decade drove more than five Irish companies out of business every day. “This illustrates the low business failure rate at present [and] also the potential for business failures to increase if economic conditions worsen in 2023,” he said.
Mr Tyrrell, a partner with accountants PwC, which produced the Insolvency Barometer published today, advised companies to shore up their cash and look again at their working capital needs. Hospitality, building and property businesses are among the more vulnerable to insolvency in coming months, the accountants say.
A Central Bank report published last year calculated that there were 5,000 Irish companies in financial trouble that were unlikely to recover. Its authors, Fergal McCann and Niall McGeever, estimated that there were a further 5,000 in trouble that could be saved if their debts were restructured. The report, Enterprise Policy Issues for Distressed Businesses, highlighted risks to businesses that included the end of taxpayer-funded Covid supports and rising inflation. Mr McCann and Mr McGeever pointed out that “informal” insolvency deals, where owners use new companies to buy the assets of troubled firms, are prevalent in the Republic.
