Over 660 corporate insolvencies were recorded in Ireland in 2023, according to the latest Insolvency & Restructuring Statistics compiled by Deloitte Ireland, a 25% increase on the previous year.
It was the highest level of insolvencies since 2018, with the hospitality and construction sectors both seeing a 62% rise.
Small firms availed of a business rescue scheme. There were 33 Small Company Administrative Rescue Process or SCARP appointments in 2023, some of which saved around 211 jobs.
Five SCARPs were unsuccessful resulting in liquidation and 70 job losses, and 10 are ongoing with 178 jobs.
Since its introduction in 2021, there have been a total of 55 SCARP appointments with 35 being successful reflecting a success rate of 76% and resulting in almost 600 jobs being saved.
James Anderson, Turnaround & Restructuring Partner at Deloitte Ireland, said this year's statistics show a return to pre-pandemic insolvency activity levels with cautious consumer sentiment, cost inflation and higher interest rates starting to impact many businesses.
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"Given the high rate of successful outcomes to date, it is evident that SCARP is an effective process which provides SMEs with a timely and cost-effective opportunity to restructure.
"Awareness of the SCARP process is still not yet widely considered by advisors and business owners/directors but hopefully that will change with time," Mr Anderson said.
"Its genesis is to provide viable businesses with an opportunity to restructure however careful planning and compliance prior to considering/ commencing SCARP is fundamental," he said.
Acting early and speaking with your trusted advisors when experiencing financial difficulties on how to resolve legacy debts should be the priority of business owners and directors as this affords more time and options to address matters," he added.
Creditors' Voluntary Liquidations (CVLs) continue to account for the majority of insolvencies with 470 (71% of total) in 2023, compared to 383 (72% of total) in 2022.
The total of 470 in 2023 represents a 23% increase in CVL activity in 2022. Court liquidations account for 6% of total insolvencies with 2023 activity levels increasing by 31% to a total of 38, compared with 29 appointments in 2022. 106 Corporate Receiverships were recorded in 2023 (16% of the total), an increase of 23% on 2022, when 86 appointments were recorded.
Despite increasing 60% since 2022, examinership activity levels remained low in 2023 with 16 recorded (2% of total) recorded despite a success rate of over 80%.
There was a total of 1,494 Members Voluntary Liquidations in 2023. These activity levels were 2.25 times the level of corporate insolvencies in 2023. The majority of MVLs in 2023 related to subsidiary companies and "SPVs" in the financial services, aviation, pharmaceutical and tech sectors.
Mr Anderson said corporate simplification activity levels in Ireland in 2023 reflect the strength of financial services, aviation, pharma and tech industries locally.
"Groups with large corporate footprints are actively reviewing non-core and SPVs entities to identify what can be wound down, thereby reducing management oversight required and saving on annual compliance costs and associated professional fees.
The latest reported Revenue statistics on warehoused debt at the end of November 2023 indicated that almost €1.8 billion of warehoused debt owed by 58,152 businesses.
10% of businesses owe more than €50,000.
€90 million of debt previously warehoused by 831 businesses was determined as uncollectable due to liquidation.
The due date for payment of warehoused taxes is fast approaching and businesses have until May 1, 2024 to either pay their warehoused debt in full, or agree a Phased Payment Arrangement (PPA). If there is no agreed PPA in place, the entire of warehoused debt is due and owing on 1 May 2024.
A key component of a PPA is that it will likely include a minimum down payment of up 40% of the warehoused liability, and agreement of same may impact tax clearances.
"It is clear that the Revenue Commissioners remain very supportive to Irish business in helping them get back on their feet post Covid," Mr Anderson said. "This continued support is on the basis that business remains compliant with current Revenue returns and the number of businesses which have been revoked from the debt warehouse emphasises the importance of ongoing compliance.
"The number of businesses yet to agree a phased payment arrangement is surprisingly low, and I would encourage business who have not yet agreed a PPA to engage with Revenue (or their advisors) before May 1, 2024 to provide certainty going forward."
Sector focus
The wide ranging 'Services Sector’ once again recorded the highest number of corporate insolvencies, with 261 in 2023 to date (39% of total insolvencies).
This is consistent with 2022, when 43% of all insolvencies were in the 'service sector’, and similarly in 2021, when 42% were in the ‘services sector’.
Financial Services companies accounted for 36% of insolvencies recorded within the ‘service sector’ in 2023, at 93 in total.
Within the financial services sector, holding companies and business and management consultancy companies were the most prevalent sub-sectors.
Technical and Professional Services and Real Estate also featured prominently within Services, with 36 and 32 insolvencies in 2023 respectively.
Elsewhere within the services sector, there were 23 insolvencies in fitness and beauty in 2023; 17 insolvencies were recorded in health and social work companies; 15 in education and the remainder in other services.
The hospitality sector recorded the second-highest number of corporate insolvencies in 2023 with 99, representing 15% of total insolvencies.
This is a substantial increase of 62% when compared with 61 insolvencies in the ‘hospitality sector’ in 2022 (and a further jump when compared with only 31 in 2021).
The hospitality industry is likely to has been particularly impacted by high energy and labour costs.
Coupled with a higher cost of living which is impacting discretionary spend, has likely contributed to the surge in hospitality related Insolvencies.
The construction industry recorded 89 insolvencies to date in 2023, representing just over 13% of total insolvencies. This is a notable increase of 62% when compared with 2022, when a total of 55 construction insolvencies were recorded. This is not surprising given the difficulties construction companies are facing around the increasing costs of materials.
The retail industry recorded 59 insolvencies in 2023, representing 9% of total insolvencies, which represents a 23% increase compared with 48 in 2022.
The remainder of the insolvencies were spread amongst the other sectors, with 40 in manufacturing and agriculture, 27 in wholesale, 20 in transport, 17 in IT, and 51 in ‘other business sectors’.
