Business closures to reach 900 this year

Insolvency reports finds few businesses utilising rescue process

Among the 110 hospitality businesses to close down this year, 63 were restaurants, 17 were cafes and 13 were pubs. Picture: iStock

Business insolvencies are running 35% above 2023 rates and 86% above 2022 levels according to a new report which forecasts insolvencies to reach 900 by the end of the year.

While the insolvency rate per 10,000 Irish businesses has doubled since 2021 it still remains below the 20-year average, the quarterly PWC Insolvency Barometer report found.

Various Government supports put in place during the pandemic resulted in a significant drop in business closures and liquidations, but as these supports have unwound, the rate of insolvencies has steadily increased. 

PWC estimated that over 4,500 businesses were saved from failure primarily as a result of the Government’s covid supports, with a number of these businesses essentially being put on ‘life-support’.

The annual insolvency rate of 32 per 10,000 is still far below the previous peak of 109 per 10,000 businesses recorded in 2012. 

The analysis, by Ken Tyrrell and Declan McDonald of PWC’s Business Recovery Services unit, shows liquidations account for 84% of all insolvencies, with 99% of all liquidations being SMEs.

They said the business rescue processes remain underutilised, with just 32 examinerships or Small Companies Administrative Rescue Processes (Scarps) recorded so far this year, suggesting that there are underlying viability issues, with the companies going straight to liquidation rather than availing of rescue processes.

The retail sector has seen 162 insolvencies so far this year, followed by hospitality with 110 closures, and construction with 80.

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This year has seen the hospitality sector impacted by a number of high-profile business closures.

Among the 110 businesses to close down this year, 63 were restaurants, 17 were cafes, and 13 were pubs.

Operators and organisations within the industry cite continuing challenges including food cost inflation, increase in labour costs due to wages and PRSI changes, increase in energy costs, and post-pandemic demand shifts and tighter consumer spending.

The report also shows 90% of insolvent companies go straight to liquidation without using formal company rescue processes, indicating fundamental problems with the business model and underlying profitability. 

The retail sector has seen 162 insolvencies so far this year, followed by hospitality with 110 closures, and construction with 80. Stock picture

There have been only four Scarps and two examinerships within hospitality this year, suggesting there was no prospect of survival for the businesses that have gone into liquidation, and profitability issues were not capable of being solved.

“The intention of Budget 2025 was to put in place the policies and measures to support businesses and continue the country’s positive trajectory,” Mr Tyrrell said.

“While the broader economy is performing well, we do see certain types of businesses facing significant challenges in the months ahead, particularly for smaller businesses.

“And with the increasing cost of doing business in Ireland, we continue to see insolvencies rise in recent years from historic lows.

“Both the hospitality and retail sectors are showing signs of stress and will be hoping for a busy trading period in the run-up to Christmas, a traditionally very important time of year for both sectors. 

"Helpfully, Budget 2025 has included a grant for businesses that will be given a cash injection of €4,000 ‘power up’ grant which will be paid prior to Christmas, for all businesses with a rates bill of under €30,000.”

Hospitality sees a trend of increased insolvencies early in the year as businesses manage to trade up to Christmas but then struggle in the first quarter and have to assess if their business is 

viable.

“It is hoped that some of the measures announced in Budget 2025 will ease the cost of doing business,” Mr Tyrrell said.

“We also hope that some of the complexities in the tax system will be alleviated.

“However, sound business principles and good forward cash flow planning cannot be underestimated for having sustainable businesses for the long term.”