The direct economic damage of business failures in Ireland is expected to be in excess of €2 billion for the year ended 2022.

Over 350 companies have declared insolvency so far this year, with associated debts outstanding of in excess of €1.6 billion, according to analysis by PwC.

It expects this figure to reach well over €2 billion by the end of 2022.

If insolvencies rise to their long term average norms, PwC estimates that the annual direct economic damage of business failures in Ireland could rise to around €6 - €7 billion.

The rate of business failures remains at historic and record low levels, but there are signs of an increase in the third quarter of this year.

The business failure rate was 18 per 10,000 companies over the last 12 months to the end of June.

This rate is much lower than the average rate over the past 17 years of 53 per 10,000 businesses, with a peak of 109 per 10,000 in 2012.

On average, just over one company is currently failing every day in Ireland.

By comparison, in the years following the global financial crisis, over five companies a day were failing.

This illustrates the record low business failure rate at present but also the potential for business failures to increase if economic conditions worsen.

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Quarter-on-quarter growth in business failures was 31% when the third quarter of this year is compared to the previous quarter.

For example, the number of business failures between July and September at 5.5 failures per 10,000 was marginally higher than the previous quarter where the rate stood at 4.2 failures per 10,000.

This indicates signs of an increase in insolvencies but from historically low levels.

During the third quarter, business failures rose by 49% in comparison to the same time last year.

For example, there was a business failure rate of 3.7 per 10,000 in the third quarter of 2021.

The UK liquidation rate is three times higher than in Ireland - recording a liquidation rate of 36 per 10,000 compared to 12 per 10,000 in Ireland for the 12 months to the end of June.

There has been an increase in the Small Company Administrative Rescue Process (SCARP) appointments between July and September with SCARP appointments accounting for 5% of all insolvencies during the quarter.

Business failures in the arts, entertainment and recreation sectors and in hospitality sectors almost doubled between the second and third quarters.

Of all insolvencies recorded over the last year, one in eight were construction related.

Dublin recorded the highest business failure rate during the third quarter at nine per 10,000.

This represents a significant increase of 80% when compared to the previous three months.

There were no business failures recorded in five counties during the period - Roscommon, Cavan, Laois, Waterford and Sligo.

Ken Tyrrell, Business Recovery Partner at PwC, said despite energy and other supports in Budget 2023, businesses continue to be faced with a combination of rising inflation, interest rates and energy costs.

"Inflation and energy costs are immediate issues with interest rates set to become increasingly relevant in 2023 as ECB rates continue to rise," Mr Tyrell said.

"In our view, there will continue to be significant pressure on the profitability and cash flow of many businesses through the winter. The focus should be on performance improvement and cost reduction."

As of July, 84,000 businesses were still availing of the Revenue debt warehousing scheme, for a total amount of nearly €3 billion.

Mr Tyrell said discussions with Revenue on restructuring these debts will be hugely important for these businesses over the coming months.

"Businesses will be carefully assessing whether they can generate enough cash to cover ongoing liabilities in addition to making repayments of historic debts such as parked tax liabilities."

"Although there were only seven cases recorded, SCARP was utilised in approximately 5% of all insolvencies during Q3 2022," he said.

"Along with Examinership, it is now one of the primary rescue tools for Irish companies in financial difficulty. SCARP is a viable alternative to liquidation for many SMEs and it is hoped that its utilisation will increase over time."