Business failures 'to rise sharply during looming lockdown'       

Significant number of companies which have lasted up until now will be unlikely come out of this lockdown, warn experts

Senior economist Jim Power said there would be a significant upturn in insolvencies in the next few months when they show up in official data.

The number of business failures will inevitably rise sharply in the coming weeks if the third lockdown extends beyond January, experts have said.

Consultant John Whelan, managing partner at the Linkage Partnership, said it would take some time for official figures to reflect the true level of company insolvencies.

"There will be a large rise in this third lockdown. There is no doubt that there will be a significant number of companies which have lasted up until now but that will unlikely come out of this lockdown," Mr Whelan said. 

The real extent of the damage to the economy in terms of the number of business failures will only become apparent at the back end of this year and into 2022 when firms cannot meet payments and Revenue demands, he said.   

"The owner will say that the odds are just too stacked against me," Mr Whelan said. "In my estimation, the number of insolvencies will continue to rise into 2023," he said.                     

He noted there had been little change in 2020 in the number of insolvencies from the pre-pandemic year of 2019.    

Senior economist Jim Power said there would be a significant upturn in insolvencies in the next few months when they show up in official data.

Professor Kieran McQuinn of the Economic and Social Research Institute said getting back to the pre-Covid rate of unemployment of below 5% would likely take through 2022 and into early 2023.             

If a large number of construction workers lose their jobs, there will be a "sizeable increase" in the number of people on the pandemic unemployment payments, Prof McQuinn said. 

Lower incomes

That will weigh on levels of spending in the economy because relatively-well-paid construction workers will be on lower incomes, he said.        

Export-focused firms, in particular, had shown an ability to navigate some of the worst effects of the Covid-19 economic crisis.

He said the ESRI had forecast last month that unemployment, including people on the pandemic payments, would fall back to 19% at the end of this spring and then come down to 10% by the end of the year.

However, any extended shutdown of the construction industry would mean that the unemployment rate would likely exceed those forecasts.  

Last year, unemployment had peaked in the second quarter last year at close to 28%.

That rate does not include people whose incomes are supported by the Government's wage-subsidy schemes through their employers. 

In Britain, the UK's Financial Conduct Authority (FCA) said that about 4,000 financial firms were at “heightened risk” of collapsing due to fallout from the first wave of the pandemic. 

The FCA surveyed 23,000 financial firms to check on their resilience to Covid-19, which last year triggered Britain’s worst economic downturn in 300 years.

“At end of October we’ve identified there are 4,000 financial services firms with low financial resilience and at heightened risk of failure,” said Sheldon Mills, the FCA’s executive director of consumers and competition.