Insolvencies fall 20% as all sectors, except motor trade, see pick-up

Insolvencies among corporates fell by one fifth in 2013 compared with the previous year with all sectors, apart from the motor trade, seeing a pick-up, according to the website insolvencyjournal.ie.

However, as banks work through non-performing loans, there could be an increase in receiverships over the next 12 months, according to David Van Dessel, a partner at the consultancy firm, KavanaghFennell.

“Although I anticipate the incidence of corporate insolvency will continue to fall, I do not anticipate the drop will be significant in 2014, as I am of the view that the pillar banks, who are the probably the main bankers to our SME sector, have been forbearing of struggling companies during the recession and, to date, have been reluctant to appoint receivers,” said Mr Van Dessel.

“This position is not tenable in the long term and I anticipate that we are approaching a point in time when banks will have to take action against companies in significant arrears.

“This is likely to lead to an increase in corporate receivership activity in 2014, as well as an increase in examinership applications, particularly under the new examinership legislation, which is specifically tailored to our SME sector. I would also anticipate a drop in liquidation activity, brought about by a move by directors of SME companies to avail of the new examinership legislation in an attempt to avoid liquidation.”

There were 1,365 insolvencies last year, compared with 1,684 in 2012 and 1,638 in 2011. The improvement in the domestic economy is feeding through to the sectors hardest hit during the downturn. At the height of the boom, construction accounted for almost 23% of GDP and one in eight jobs. However, there has been a stabilisation over the last 12 months.

The retail sector was also badly hit during the downturn, as domestic consumption nosedived. Over the past year, there have also been signs of stabilisation of the domestic economy, with consumption forecast to increase in 2014 for the first time in five years.

Geographically, Leinster accounted for 64% of all insolvencies, with Munster accounting for 23%, Connaught 9%, and Ulster just 4%.