THERE WAS a 34 per cent increase in the number of companies placed in liquidation, receivership or examinership in the first three months of the year when compared with the same period last year.
Figures compiled by the FGS accounting and consultancy firm show 469 companies were placed in liquidation, receivership or examinership in the period compared to 351 in the same part of 2009.
The acceleration in failures in 2010 has continued from the final three months of 2009 where some 435 failures occurred. Should the trend continue for the remainder of 2010, it is probable that some 1,800-1,900 failures will occur, compared to 1,570 failures in 2009, the firm said.
The ongoing contraction in the construction/property development sector was obvious from the statistics, with the sector accounting for 177 of all failures.
There were as many failures recorded within the sector in the first three months of 2010 as had taken place in the previous two years combined.
Another notable trend was the significant increase in failures in the retail sector. They jumped from 28 in the first three months of 2009, to 76 in the first three months of this year.
“This is due primarily to the inability to pay high rents that were originally struck at the height of the economic boom,” FGS said.
Other sectors in which significant failures occurred were the hospitality sector, which accounted for 12 per cent of the total failures, as well as home furnishings/interior design, professional services and the motor industry.
Retail Ireland, the Ibec group that represents the Irish retail sector, said the insolvency figures confirmed the extent of the crisis facing the sector.
Torlach Denihan, director of Retail Ireland, said 2009 had seen the largest-ever annual drop in retail sales and that retailers had tried to save their businesses by cutting costs.
“The number of insolvencies in the retail sector in the first quarter of 2010 increased 171 per cent by comparison with the same period last year.
“Many of these insolvencies are due to the fact that, during 2009, retailers were not able to respond to a fall in sales by reducing rents or commercial rates.
“While most other suppliers to the retail sector reduced their prices, many landlords used upward-only rent review clauses to increase rents and most local authorities did not reduce commercial rates.”
Mr Denihan said that to avoid a repetition of 2009, when approximately 30,000 retail staff lost their jobs, landlords need, at a minimum, to reverse on a voluntary basis rent increases implemented under the last rent review.
“This process should be overseen by Government. Every local authority should give a rebate on the 2010 commercial rates equivalent to a 10 per cent reduction on the 2009 rates bill. Unless there is action along these lines, more bad news will follow,” he said.
