29% increase in insolvencies this year – Deloitte
New figures show a 29% increase in insolvencies so far this year with corporate insolvencies expected to exceed pre-pandemic levels over the next two years.
More than 500 corporate insolvencies have been recorded in Ireland so far in 2022, the latest insolvency statistics from Deloitte show.
This marked an increase of over 29% from 2021 when the total number of corporate insolvencies hit 401.
This year saw the introduction of the Small Company Administrative Rescue Process (SCARP), which is designed to allow SMEs struggling with excess debt to continue to trade while negotiating debt write off and restructure with creditors.
Deloitte said that 22 companies have availed of the process, representing a take up of about 4%.
Eight companies have successfully completed the SCARP process with some 290 jobs saved so far. But three have failed, with those companies being placed into liquidation and the loss of more than 60 jobs.
Ten SCARPs remain active, with a potential 125 jobs to be saved and one appointment from April is currently in court.
Deloitte said that as in previous years, Creditors’ Voluntary Liquidations (CVLs) accounted for most insolvencies this year with 72% of the total compared to 65% last year.
It said this represents a 42% increase in CVL activity from 2021 and is the main contributor to the overall increase in insolvency activity.
A total of 84 Corporate Receiverships were recorded so far this year), an increase of just under 8% on 2021, when 78 were recorded.
Meanwhile, 29 court liquidation appointments were recorded in 2022, a 34% decrease from 44 Court Liquidations in 2021.
But Deloitte said the 2021 figure was skewed by 27 Court Liquidations all related to the same group of companies in the fourth quarter of 2021.
The number of examinerships to date in 2022 is considerably lower compared with previous years with only 10 examinerships, representing 2% of the total insolvencies, compared with 18 in 2021.
But when examinerships are combined with the new SCARP process – both being restructuring procedures – the total number of restructuring events amounts to 32 in 2022 – a significant increase of 78% when compared to 2021.
Today’s figures show that the wide ranging “service sector” once again recorded the highest number of corporate insolvencies, with 219 in 2022 to date – or 44% of total insolvencies. This is consistent with 2021, when 42% of all insolvencies were in the sector, and also in 2020, when 39% were in the sector.
The financial services and real estate companies accounted for the vast majority of insolvencies recorded within the “service sector”, with 117 – 69 in financial services and 48 in real estate.
Health, fitness and beauty companies also featured prominently again in the “services sector”, with 36 insolvencies recorded so far compared with 31 in 2021.
15 insolvencies were recorded in technical and professional services companies, nine in entertainment, nine in Arts and Media, five in education, five in IT consultancy and 23 in other services in 2022.
The “hospitality sector” recorded the second-highest number of corporate insolvencies in 2022 with 56, representing 11% of total insolvencies. Deloitte noted that this was a substantial increase of 81% when compared with only 31 insolvencies in the sector last year.
Meanwhile, the construction industry recorded 50 insolvencies to date in 2022, representing just under 10% of total insolvencies – a notable decrease of 28% when compared with 2021, when a total of 69 construction insolvencies were recorded.
The retail industry recorded 44 insolvencies in 2022, representing just under 9% of total insolvencies, which represents a 16% increase compared with 38 in 2021.
David Van Dessel, Partner, Financial Advisory at Deloitte said that today’s figures demonstrate we are moving towards pre-pandemic levels of insolvency activity, given the artificially low levels of insolvency in recent years.
“Furthermore, given the economic headwinds ahead with rising inflation, increased energy costs and higher interest rates, it is anticipated that insolvency activity will likely surpass pre-pandemic activity over the next 12 to 24 months,” Mr Van Dessel said.
He also said that some sectors have been more exposed than others, and we can see that in hospitality, for example.
“While Government supports gave a lifeline to many businesses in the industry during the Covid era, the changed patterns of consumer behaviour, escalating energy costs and difficulties in recruiting and retaining staff meant that some could no longer survive, and the only option was to shut their doors,” he added.