Corporate insolvencies up 30% as end of pandemic supports bring numbers back to 2019 levels

Despite the recent surge in closures, insolvency numbers still remain around 30% below 2017 and 2018 levels

In the first half of 2023, a total of 243 Creditors’ Voluntary Liquidations (CVLs) were recorded, representing just under three-quarters of total insolvencies during the period

Corporate insolvencies have risen by almost a third with 329 businesses closing their doors in the first six months of 2023.

According to the latest insolvency statistics by Deloitte, the figure points to a return to 2019 levels, prior to the implementation of government supports for businesses during the pandemic. 

In addition, the increase in business closures coincides with rising interest rates following eight consecutive hikes by the European Central Bank to curb inflation, with a number of 'zombie businesses' - those that could not be kept open without the help of government support - declaring insolvencies once they were removed.

Return to pre-pandemic levels

Notwithstanding the recent surge in closures, insolvency numbers still remain around 30% below 2017 and 2018 levels.

“Despite the economic impact of Covid-19 and the negative impacts of high inflation, soaring energy costs and rising interest rates, insolvencies remarkably are still only at 2019 levels, when the economy was in rude health and didn’t face the same economic headwinds," said Deloitte Financial Advisory Partner, David Van Dessel.

"Although we have not yet seen a material fallout from the economic impact of Covid-19 or increased interest rates and inflation, it is evident from H1 2023 that we are moving towards pre-covid insolvency levels, after a period of artificially low levels."

In the first half of 2023, a total of 243 Creditors’ Voluntary Liquidations (CVLs) were recorded, representing just under three-quarters of total insolvencies during the period.

Furthermore, there were 41 court receiverships, reflecting a 29% fall compared to the same period in 2022. However, the first six months of this year also saw 24 court liquidations, a sizeable jump from 13 in the same period last year, with 17 SCARP appointments and four examinerships. 

"In all situations of financial distress, early action by company directors dramatically increases the chances of avoiding foreclosure and with the successful introduction of SCARP, directors of struggling SMEs now have a restructuring process that is bespoke for the SME sector," Mr Van Dessel continued.

Closures impacting hospitality and construction 

In line with historical trends, the services sector recorded the highest number of corporate insolvencies, accounting for 39% of all business closures in the period.

Within the sector, financial services organisations recorded the largest share, accounting for 42, with technical and professional services recording 19. 

Outside the sector, construction recorded 50 business closures during the first half of this year, representing 15% of all insolvencies recorded during the period - a significant increase compared to the same time last year. The hospitality sector recorded 41 insolvencies during H1, representing a substantial rise from just 14 in the first half of 2022.

Companies in Leinster recorded 252 insolvencies during the first half of 2023, which represents 77% of total insolvencies, followed by Munster which recorded 39. 

According to recent findings from CRIFVision-Net this month, Cork saw a dramatic surge in business closures, rising by 65% in the first half of this year, almost double the increase seen in Dublin which rose by just 35%.