Corporate insolvencies have fallen this year, down 36 per cent in the first nine months compared to the same period in crisis-struck 2020, according to Deloitte. However, the accountancy giant warned that the full impact of Covid-19 restrictions on the Irish economy has still to materialise.
A total of 278 insolvencies were recorded between January 1st and September 30th, Deloitte said, down from 431 in the first nine months of last year.
Some 109 of this year’s insolvencies occurred during the third quarter, up sharply on the second three months of the year when there were 58.
The expected removal of Government supports in the months ahead may crystallise the “true economic impact” of the pandemic on small and medium-sized enterprises (SMEs) revealed in the first half of 2022 and beyond, Deloitte said.
"We are still in a position where Covid supports and creditor forbearance are probably holding back the tide on corporate insolvencies," said David Van Dessel, financial advisory partner at Deloitte.
Mr Van Dessel welcomed the introduction of the Small Company Administrative Rescue Process, which gives SMEs that are viable but have fallen into financial difficulty an alternative to the examinership process.
“Our hope is that the Scarp process will ease the burden on many SMEs in difficulty as the safety net of Government supports is removed,” he said.
The services sector once again recorded the highest number of corporate insolvencies this year, with 129, representing 46 per cent of the total.
Within services, financial services companies accounted for 28 in the third quarter, or half of the services sector insolvencies in that period, while there were 21 insolvencies in the third quarter in the health, fitness and beauty sector.
The construction sector recorded the second-largest number of insolvency appointments in the third quarter, with 21. There have been 52 insolvencies in construction in the first nine months of the year, up 16 per cent on the same period in 2020.
“Interestingly, construction is the only sector that has recorded an increase year-on-year. That could signal an upward trend in construction insolvencies as we see the impact on margin of supply shortages,” said Mr Van Dessel.
Hospitality and retail
The hospitality sector has recorded the joint-third-highest level of insolvencies so far in 2021 at 26, representing 9 per cent of the total, which was “surprisingly lower” than the level of insolvencies this sector recorded in the same period in 2020, when there were 70.
Only two of the hospitality insolvencies this year have been pubs.
The retail sector has also recorded 26 insolvencies so far in 2021, though only six of these were in the third quarter. This compares with 88 retail insolvencies in the first nine months of 2020.
"Retail Excellence Ireland recently revealed that that the majority of its members are struggling to have meaningful conversations with their landlords about rent arrears," said Mr Van Dessel. "Going forward, this issue could give rise to an increase in insolvency activity in the retail sector."
