Survey: Eight firms a day go bust

EIGHT companies a day went bust in May with figures showing people are shying away from starting a business.

A survey, conducted by vision-net.ie showed that court-ordered liquidations are up 50%, while for the first time, more than one in every two companies are now showing signs consistent with business failure.

The figures show that 1,181 people chose to become a company director for the first time in May, down 42% on the same time last year.

However, the total number of first-time directors for the first quarter of this year is 7,062, compared with 4,883 for the same period last year.

Vision-net.ie managing director Christine Cullen said: “The sharp drop in first-time company directors is telling. It is impossible to say with certainty what may be influencing this, but the lack of finance options for would-be entrepreneurs and people adopting a more cautious approach are among the likely factors.

“The business climate is such that the risk takers so crucial to generate economic activity are not as active as they once were,” she said.

Ms Cullen said the rise in court-ordered liquidations signals a hardening of the position being taken by debtors and by the courts.

“More than one in every two companies are now in trouble and at risk of not being able to meet their daily financial and trade commitments. This does not necessarily mean that these companies are facing closure, but it does have a real domino effect in terms of cashflow and debt management,” she said.

The figures show 84% of the liabilities for companies which are closing in May are unsecured creditors, meaning unpaid debts will most likely not be realised.

Of the €93 million owed to creditors from meetings, more than €40m was in the retail and wholesale sectors.

Overall, 155 liquidators were appointed in May, compared with 190 in April. There was 44 receiverships, compared with 64 the previous month and just one examiner was appointed.

Vision-net also carried out credit rating stress tests on 13,414 private limited companies who have filed accounts in the past five weeks and 14% of these firms suffered a worsening of their credit rating.

This means that 55% or 7,431 of those companies sampled are now in the high-risk category.