Firms ‘at risk of closure’ up 10%

THE number of Irish companies in serious danger of going out of business has shot up by 10% since the beginning of this year, according to a new study.

According to a “stress test” survey of 35,000 companies — undertaken by business information and risk agency, Vision-net — covering the first quarter of 2011, almost half (48%) are “showing signs consistent with business failure”. That marks a 10% increase on the previous quarter; the last three months of 2010.

The latest survey from Vision- net found that 16,800 of the 35,000 respondents are now officially in the high-risk category and that while 70% — or 24,500 — filed accounts during the quarter, 4,500 of those firms were late with their returns.

Even more alarmingly are that 350 meetings with creditors — in order to begin winding-up proceedings for firms — were triggered between the beginning of January and the end of March; and that companies that did go out of business during the quarter left behind €621m in unpaid debt — or €10m per working day.

“Insolvencies, liquidations, closures and unpaid debt are all up on the previous quarter. Our numbers are also signalling that the second quarter will see a further rise in liquidations,” according to Vision-net managing director, Christine Cullen.

“The rise in companies at risk of failure is particularly notable. It’s too early to determine fully whether this is a spike or a sign that those who have been holding on are now falling over the edge.

“The results are worrying. Having started off the year on a stable footing we are now seeing slippage,” she added.

Late last year Vision-net predicted that nearly 40% of Irish companies were in danger of going out of business during 2011, leaving behind combined debts of nearly €300bn. In 2010 the company predicted 80% of all business failures before they happened.

The latest Vision-net survey also showed that more than 155 companies had a receiver appointed to them during the first quarter, up 54% on the final quarter of last year and just under 500 firms had a liquidator appointed. Unsurprisingly, the construction sector bore the brunt, with 66 companies going out of business.

On the plus side, 3,776 new companies were incorporated in the first three months of this year; a quarter-by-quarter rise of 7%.