The level of insolvencies among Irish businesses rose by a third last year, according to new data from PwC.
717 firms became insolvent during the 12 months, compared to 545 in 2022.
The final quarter of 2023 registered the highest number of insolvencies in any quarter since the pandemic, reaching 229.
But despite the increase in business failures, the levels last year still remained below pre-pandemic levels, PwC's latest Insolvency Barometer shows.
More than half of the failures in 2023 came in the retail, hospitality and construction sectors and around 99% were small and medium sized enterprises (SMEs).
The number of firms availing of the Small Company Administrative Rescue Process (SCARP) in 2023 made up just 5% of the total insolvencies.
There were just 18 examinerships which accounted for less than 3% of all insolvencies.
By comparison, there were 17 times more liquidations than SCARPs during 2023.
The organisation estimates that the growth in insolvencies will continue, with around 1,000 expected this year and with most of those SMEs.
This would bring the level back closer to the 20-year historical average rate of failures.
"Retail, Hospitality and Construction will continue to be the most important sectors to watch in terms of insolvency levels and in terms of their agreement on the upcoming Revenue debt warehousing deadline," said Ken Tyrrell, Business Recovery Partner, PwC Ireland.
"An increased level of loan defaults within the commercial real estate sector is also expected."
"Already the impact of increased interest rates and the resultant decreases in commercial property values have taken effect in 2023 prompting an increase in lender initiated receiverships."
"Borrowers will be under continued pressure due to the risk of Loan To Value covenant breaches as well as higher interest repayments leading to an increasing level of loan defaults."
PwC said there has been a small increase in the number of lender initiated receiverships in 2023 but they still remain relatively low at just 105, an increase from 83 in 2022.
However, it also predicts that lender patience will be tested this year as debt levels and interest rates continue to bite.
In particular, it expects increased pressure on the retail, hospitality and construction sectors this year as they are responsible for the just over half of the €1.8bn in debt warehoused with Revenue during the pandemic, which is falling due for repayment.
Overall though, 85% of the total warehoused debt is held by only 10% or 6,000 firms.
