Company failure rate set to exceed 2010 figure

THIS year is on course to top 2010 in terms of company failures, as figures show that an average of 33 companies per week went bust between January and the end of April.

The new data from InsolvencyJournal.ie measured 162 insolvency appointments for April alone; with the total for the first four months of the year amounting to 558 — 3% up on the same period last year. There was also a 15% year-on-year increase in the number of firms going into receivership during the period.

“Increased levels of enforcement action by NAMA and the banks,combined with continued weak consumer sentiment in the retail sector, suggests that there will be no reduction on the 2010 level of insolvencies,” said Ken Fennell of leading corporate recovery agency, Kavanagh Fennell, which publishes the Insolvency Journal.

Last year saw more than 1,500 corporate insolvency cases.

While Mr Fennell said that the figures for the first four months of 2011 are “very much in line with expectations”, he added that growing levels of business failure in the retail and services sectors (unsurprisingly, the construction sector still contains most instances of companies going out of business) is becoming a real concern.

“The continued growth in retail and service insolvency appointments is worrying.

“These sectors are highly dependent on consumer sentiment and increasing rates of business failure reflect a lack of confidence in the Irish economy. Continued downward price pressure and weak levels of demand suggest this trend is likely to continue,” he added.

April, alone, saw a total of 31 firms in the service industry face insolvency, with 22 in the retail sector. The wholesale sector has also witnessed a significant increase in insolvencies this year, with 32 firms affected to date, compared to 37 for all of 2010.

Dublin recorded the highest number of corporate failures during the first four months of the year, with 200 insolvencies in the capital.

Kavanagh Fennell has also said that the trend of high-profile NAMA appointments over large developers, seen in April, is likely to continue.

“Developments in this area to note are the high volume of receiverships over personal borrowings, rather than companies which aren’t formally registered or reported as there is no requirement under Irish law.

“It’s to be noted that there’s been a rapid increase in appointments in this area in the past two years,” the company said.