Deloitte has today reported a 36% decrease in corporate insolvencies so far this year but cautioned that Government supports are still holding back the tide on companies going under.
The latest insolvency statistics from Deloitte show that the total number of corporate insolvencies recorded in Ireland up to the end of September stood at 278.
This is down 36% from the same time last year when the total number recorded was 431.
But on a quarterly basis, a total of 109 corporate insolvencies were recorded during the third quarter of this year - a notable increase of 88% when compared to the second quarter of the year when there were only 58 incidents.
While there was a significant increase in insolvency activity between the second and third quarters, Deloitte said it is evident that the full effect of Covid-19 restrictions on the economy has still yet to materialise in terms of the total number of corporate insolvencies.
With the anticipated removal of government supports after the year-end and beyond, the first half of 2022 might begin to reveal the true economic impact on the SME sector, it cautioned.
Today's figures show that the services sector once again recorded the highest number of corporate insolvencies so far this year with 129 insolvencies, representing 46% of total insolvencies recorded so far this year.
The construction sector recorded the second-largest number of insolvency appointments in the third quarter, with 21 companies entering an insolvency process (19% of total insolvencies recorded in the quarter).
The hospitality sector has recorded the joint-third-highest level of insolvencies so far in 2021 at 26, representing 9% of the total number.
Deloitte said that given the impact of Covid-19 restrictions on the hospitality sector, this is surprisingly lower than the level of insolvencies recorded in that sector during the same period in 2020, when 70 insolvencies were recorded – a decrease of 63%.
The retail sector has also recorded 26 insolvencies so far in 2021, but only six of these occurred in the third quarter.
Deloitte said that Retail Excellence recently revealed that the majority of its members are struggling to have meaningful conversations with their landlords about rent arrears and this issue could give rise to an increase in insolvency activity in the retail sector.
Geographically, the highest number of corporate insolvencies so far this year was recorded in Leinster, with 62% (172) of total insolvencies. Munster accounted for 26% (72) of insolvencies, with Connacht making up 8% (21) and Ulster making up 5% (13).
David Van Dessel, Partner, Financial Advisory at Deloitte said, that Covid supports and creditor forbearance are probably holding back the tide on corporate insolvencies.
"As we enter the final quarter of 2021, the welcome introduction of the Small Company Administrative Rescue Process, or SCARP, presents SMEs with a realistic alternative to the underutilised Examinership process," Mr Van Dessel said.
"The SCARP allows directors to maintain control of their business and can be commenced and completed without the automatic need for attendance at court, which should make it appealing to many SME directors who believe their business is viable, but which perhaps fell into financial difficulty due to the pandemic," he explained.
"Our hope is that the SCARP process will ease the burden on many SMEs in difficulty as the safety net of government supports is removed," he added.
