Rise in business insolvencies linked to inflation

Increase counterbalanced by a 12% jump in new business startups

Cork experienced the highest number of new insolvency cases for the quarter, totalling 21.

A sharp rise in business insolvencies is being linked to ongoing inflation pressures faced by businesses in all sectors.

Data from CRIFVision-Net for the third quarter shows the number of companies becoming insolvent rose by 54% compared to the same period last year.

A total of 185 insolvencies were recorded in July, August, and September, versus 120 in the third quarter of 2022.

Ireland’s economy has remained relatively strong this year despite cost-of-living challenges and a mixed global outlook. The year-on-year data suggests that inflationary pressures have driven an uptick in the rate of insolvencies, said CRIF-Vision-Net.

Over the period of analysis, a slight increase in insolvencies was seen in education, leasing, and retail, all of which had relatively low initial numbers.

On a county level, Cork experienced the highest number of new insolvency cases for the quarter, totalling 21.

The rise in insolvencies was counterbalanced by a 12% jump in new business startups. In the third quarter, 5,154 startups were recorded, versus 4,593 for the same period last year, and 19 counties recorded company startup growth with just seven seeing a year-on-year decrease versus the same period in 2022.

Economic bellwether sectors such as hospitality (+15%), construction (+10%), and IT (+30%) all recorded startup growth. Another key industry, real estate, saw a marginal 1% decrease in new startups.

Dublin accounted for the largest number of new startups nationwide in the third quarter, recording 2,328 registrations.

CRIFVision-Net managing director Christine Cullen said the figures present a peculiar picture.

“Despite the presence of several global challenges, the determination of local entrepreneurs remains unwavering, showing a robust willingness to invest in new ventures,” said Ms Cullen.

“The persistent nature of inflation, however, has emerged as a notable factor contributing to the elevated insolvency rates.

Inflation persistence has prompted challenges for businesses, particularly around areas like repayments, given the backdrop of elevated prices and the rising interest rate environment.

“This interplay between inflation and interest rates has undoubtedly had an influence on the insolvency landscape.

Ahead of the budget to be announced on Tuesday, Ms Cullen said it was increasingly crucial for the Government to provide robust support to businesses.

“These supports can help cushion the impact of inflation and interest rate fallout.

“Ireland’s economic outlook continues to be optimistic, as seen through the growth in startups.

“The resilience of its entrepreneurial spirit, coupled with a potentially improving inflationary conditions, provides reasons to be positive.

“While challenges persist, there’s an underlying sense of confidence that Ireland’s business community will continue to adapt and thrive amid the challenges, especially with supports in place.”