Corporate insolvencies back to pre-covid levels

There were 663 corporate insolvencies in 2023, up 25% on 2022. 

The number of corporate insolvencies ticked back up to pre-pandemic levels last year, with companies in the services sector, hospitality and construction among the hardest hit, new figures show.

According to the latest insolvency and restructuring statistics from accounting firm Deloitte Ireland, there were 663 corporate insolvencies in 2023 representing a 25% increase on 2022.

Of these, 470 were creditors' voluntary liquidations. 

The services sector recorded the highest number of corporate insolvencies, with 261 during 2023 — accounting for 39% of the total. Of these, 93 were in financial services, within which holding companies as well as business and management consultancy companies were the most prevalent.

The hospitality sector recorded the second-highest number of corporate insolvencies last year, with 99, representing 15% of total insolvencies. The sector was likely to have been hit particularly hard by high energy and labour costs, along with the increasing cost of living impacting discretionary spend.

The construction sector recorded 89 insolvencies and retail recorded 59.

In addition, 33 Small Company Administrative Rescue Process (Scarp) appointments were made, of which 78% were successful — saving over 200 jobs — with five companies going into liquidation, and a further 10 still going through the process. 

Tax warehousing deadline

The focus for many businesses will now turn to the tax warehousing deadline on May 1. Businesses will either pay off their debt or agree to a phased payment agreement (PPA). 

If there is no agreed PPA in place, the entire of warehoused debt is due. According to latest Revenue statistics, as of November, there is almost €1.8bn of warehoused debt owed by 58,152 businesses.

While there was a significant number of insolvencies in the services sector, the latest Purchasing Managers Index from AIB shows the sector expanded in December, albeit at a slower pace.

The PMI is a single-figure indicator of a sector’s performance, with any figure greater than 50.0 indicating an overall improvement in the sector.

The services PMI shows activity in the sector at 53.2, down from 54.2 in November — marking the second lowest reading in 2023.

This stands in stark contrast to the manufacturing sector’s PMI, which stood at 48.9 in December.

AIB chief economist Oliver Mangan said the PMI had shown an expansion of business activity during December but “as has been the case for most of the year, the pace of growth eased”.

“However the Irish index remains above elsewhere, with the flash services PMIs coming in at 52.7, 48.1 and 51.3 for the UK, eurozone and US, respectively, in December,” he said.

The anticipation of rate cuts over 2024 has helped bolster business sentiment — which is at the highest levels since May — but inflationary pressures will still be an issue for businesses.

In December, the rate of inflation picked up for the first time in six months, with firms reporting higher wages, utilities and insurance costs.