Business failures up 54% in the first half of 2023

The arts, entertainment and recreation sector had a failure rate of nearly three times that of the national average over the past 12 months.

There has been a surge in business failures in Ireland in the first half of the year with insolvency levels 54% higher than 2022.

According to PwC’s Insolvency Barometer, 321 businesses failed so far this year, up from 209 in the same period last year. In the second quarter, insolvencies increased by 55% when compared to Q2 2022.

In the past 12 months, the business failure rate has increased to 25 companies per 10,000 compared to the historic low of 14 per 10,000 businesses recorded at the end of 2021. However, overall business failure rates remain low. The pre-pandemic insolvency level was 36 per 10,000 in 2019. 

PwC said it also expects that business failure rates are likely to rise even further in the year ahead, particularly when the Revenue's Debt Warehousing Scheme unwinds. 

The report notes that more than 6,000 companies that availed of the scheme still owe €1.9bn and will need to reach a phased payment agreement with Revenue before May 2024. Revenue recently announced that 510 companies which were eligible for its tax debt warehousing scheme have been liquidated in recent years with over €55m of tax debt outstanding (€50m of this being warehoused). 

"As we get closer to the May 2024 deadline, we expect this number to increase," PwC said. "Total warehoused debt represents around 2.5% of projected total exchequer receipts in 2023. In addition to the 6,000 companies with larger liabilities above owing €300k on average, a further 57,000 companies owe €0.3bn in total, but at a much smaller level at an average of €5k."

PwC said the arts, entertainment and recreation sector had a failure rate of nearly three times that of the national average over the past 12 months, with an annual failure rate in that time of 63 per 10,000 businesses. The health and hospitality sectors had the next highest annual failure rates over the past year with 48 and 41 business failures per 10,000 respectively.

"Predominantly SME liquidations are making up nearly all of the increases and this is largely down to the impact of cost inflation, rising interest rates and legacy debt build-up," Ken Tyrrell, Business Recovery Partner, PwC Ireland, said.

"Lender enforcement still remains low. And with so many companies availing of Revenue’s Debt Warehousing Scheme, we expect companies will look to formal restructuring processes such as examinership and SCARP to deal with legacy debts."