There will be “close to 1,000″ corporate insolvencies this year after finalised figures for 2023 came in higher than expected at 717, according to the latest insolvency barometer from professional services company PwC Ireland.
The accountancy giant said there had been an uptick in business failures in the fourth quarter of 2023 and that having reached two per day across the year as a whole – up from an average of one per day in 2021 – insolvencies will “move towards three per day” this year.
An increased level of loan defaults within the commercial real estate sector is expected in 2024, it warned.
Although the number of lender-initiated receiverships remained “relatively low” at 105 last year, this was up from 83 in 2022, with PwC predicting a further uptick this year. “Lender patience will be tested” in 2024 as debt levels and interest rates continue to bite, it said, with companies seeking to refinance facing “a more challenging lending environment”, especially in the commercial real estate sector.
The retail, hospitality and construction sectors together made up more than half of all insolvencies last year, accounting for 144, 127 and 97 business failures, respectively.
Overall insolvency levels rose by 32 per cent last year compared to 2022, when 545 companies became insolvent. But the 2023 number has almost doubled on the rate seen in 2021, when there were 379 insolvencies, with many businesses kept afloat at the time by Covid-era Government supports that have since been unwound.
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The 229 insolvencies in the fourth quarter of 2023 also marked the highest quarterly figures seen since the pandemic, although the rate at which businesses failed last year, at 27 per 10,000 companies, remained below the level seen in 2019, when it was 36 per 10,000. The insolvency rate was also well short of the peak of 109 per 10,000 businesses recorded in 2012.
PwC said it expected further increases in the rate in 2024, however, amid signs that it is “beginning to revert to pre-pandemic levels”.
It flagged “increased pressures” on the retail, hospitality and construction sectors, which as well as accounting for 51 per cent of all insolvencies in 2023 also generated slightly more than half of Revenue warehoused debt, with about €920 million outstanding.
Although there are nearly 60,000 businesses with warehoused Revenue debt of €1.8 billion, 85 per cent of the total warehoused debt is held by only 10 per cent, or about 6,000 businesses.
Unless the Revenue extends its deadline for either repaying the debt or reaching a phased payment agreement, companies who are unable to either repay or reach an agreement by May 1st are likely to require some form of restructuring.
PwC said the 33 appointments made under the Small Company Administrative Rescue Process (Scarp), the small business rescue regime introduced in December 2021, as well as the 18 examinerships in 2023 suggested both processes were under-utilised.
“With global and local continued economic uncertainties, an upcoming year of elections across Ireland, the EU, UK and the US, the high cost of doing business in Ireland coupled with having to tackle climate and transformation agendas, many businesses continue to operate in a challenging environment. Restructuring activity is rising in the face of this continued disruption,” said Ken Tyrrell, business recovery partner at PwC Ireland.
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