New figures from Deloitte Ireland show that the number of corporate insolvencies jumped by 47% in the first quarter of 2024 compared to the same time last year and could reach a total of 800 by the end of the year.
Deloitte's latest Insolvency & Restructuring Statistics reveal 214 corporate insolvencies during the first three months of the year, up from 146 cases during the first quarter of 2023.
The increase was mainly driven by Creditors' Voluntary Liquidations (CVLs), which saw a 71% increase from the same period last year.
Today's figures also show a total of five SCARP (Small Company Administrative Rescue Process) appointments and two Examinerships were made in the first quarter of the year - a downward trend in the level of companies seeking early help.
Since its introduction in 2021, Deloitte noted that there has been 60 SCARP appointments in total with a 73% success rate, saving 761 jobs.
Hospitality saw a 142% increase in insolvencies in the three month period under review, with an increase of 27 businesses becoming insolvent since this time last year.
Deloitte noted that 35 of the 46 insolvencies in the hospitality sector related to restaurants and cafes, adding that this "significant" increase is likely due to increased labour and energy costs, as well as an increase in the VAT rate to 13.5% and insurance costs.
The mandatory Pension Scheme will come into operation in September of this year. Deloitte said these factors, together with the overall higher cost of living impacting discretionary spend, is likely to see continued distress in the hospitality industry for the rest of the year.
James Anderson, Turnaround & Restructuring Partner at Deloitte Ireland, said today's statistics show there is an increased rate of impairment within businesses and as a consequence we are seeing a material uptake in insolvencies.
"We forecast that there will be in the region of 800 insolvencies in 2024, this is an increase of 200 on our 2023 forecast - where the actual number was 663," Mr Anderson said.
"800 would represent the highest number of insolvencies since 2017 (874) and a return to the pre-pandemic insolvency activity level. However, increased labour, insurance and energy costs will continue to be a challenge for businesses," he added.
Mr Anderson said the success rate of SCARP and the number of jobs being saved due to the process reaffirms its effectiveness.
"While this is only the first quarter of 2024, the low number of SCARP appointments so far continues to highlight that there needs to be greater awareness of the SCARP process and its benefits. We would encourage company directors and their advisors to act early to seek professional advice and examine all rescue options available," he added.
