Sharp rise in service company failures

Last year saw a 65% increase in the number of company failures in the services sector, despite there being a general downward trend in insolvency figures across the economy.

According to accountancy giant Deloitte, 2016 saw a total of 1,032 Irish corporate insolvencies last year; 2% down on the 1,049 in 2015.

Also of note was a 38% drop in the number of insolvencies in the retail sector. However, the number of company failures in the services sector soared to 329 from 200 in 2015.

Deloitte sees the overall downward trend in company failures continuing this year, but also sees the high level of failures in the services sector remaining “significant” this year.

“While this increase in the service sector failures may seem counter-intuitive it often occurs as the economy emerges from a recession,” said Deloitte’s head of restructuring services David Van Dessel.

“Many companies have spent so long in survival mode that when new orders do start to finally come through they often rush to take advantage and can end up over-trading and running out of cash.

"This problem is compounded by the difficulty companies can still face accessing financing and loan facilities and...this can be fatal,” he added.

Regarding the overall figures, creditors’ voluntary liquidations (CVLs) accounted for 61% of cases, receiverships 34% and there were 45 court liquidator appointments (half of which were brought by Revenue).

Only 1% of cases were examinerships, despite new legislation making the process more accessible and cost-effective to SMEs.