Business closures soar by 46%

BUSINESSES continued to struggle this month, with figures showing that the number of company closures soared by 46% while an average of €6.6 million was left unpaid in debt each day.

Figures released by company information site, vision-net.ie also show a drop in limited company start-ups in February.

This month 130 companies called meetings of creditors to wind up their businesses, an increase of 41 on the previous month. These meetings of creditors resulted in €133m of unpaid debt, averaging €6.6m for each working day.

Over half of this debt (53%) is unsecured and is likely to involve trade creditors, meaning they are left to fight it out at creditor meetings and are likely to see only a fraction of the money owed. The balance (47%) is more likely to be revenue and bank loans.

Among the companies to hold creditors’ meetings in February were the four Toni & Guy hairdressing outlets in Cork, Limerick, Dublin and Kilkenny and companies involving Kilkenny hurler DJ Carey — DJ Carey Enterprises Ltd, Dublin Janitorial Centre Ltd and Alton Ltd.

Christine Cullen of vision-net.ie said: “After a positive start to the year, February saw a slide back into negative numbers. The debt mountain continues to grow. The number of suppliers going unpaid is escalating and the amounts involved are staggering.

“Debt continues to be a real issue in business. As a result, we are seeing a more aggressive stance being taken against debtors, with the legal option increasingly being used.”

Sectors impacted by business closures in February included construction, wholesale, manufacturing companies, hotels and restaurants. Receivers were appointed to 44 companies in the month, which is up 63% on the same month last year. In January, 58 receivers were appointed.

The figures also show that 1,018 companies were incorporated in February, which is down nearly 14% on last month and down 7% on February 2010.

However new business name registrations, which would include sole traders, totalled 2,638, up 10% on the same period last year.

Vision-net.ie found that over the last four weeks, 17% of companies who filed accounts this year have had their credit rating downgraded, while a modest 7% showed an improvement.

“The trend of negative credit ratings is continuing. Almost one in every five companies saw their credit score worsen in February, increasing the prospect of unpaid debts further.

“It is imperative businesses assess risk before entering agreements as the prospect of getting burned is high,” said Ms Cullen.