Government 'life support' so far helping to keep businesses afloat             

The number of Irish business failures will rise as huge Government aid comes to an end and the full effects of the Covid-19 economic crisis and Brexit bite hard, warns accountancy firm Baker Tilly. File picture.

A second major business advisory group has warned the number of Irish business failures will inevitably rise as the "life support" of huge Government aid comes to an end and the full effects of the Covid-19 economic crisis and Brexit bite hard.  

Accountancy firm Baker Tilly said its survey of examinerships has so far shown no major pickup in the number of companies going into examinership during the first 11 months of the crisis but that matters would likely worsen in time. 

Its survey, which tracks the number of jobs that have been saved when companies successfully exit an examinership, showed there were 593 jobs saved last year, despite the onset of the Covid crisis in early March.  

Business failures

But the number of business failures has been kept artificially low because of the huge amounts of support to business and household incomes injected by the Government into the economy.             

“Although it’s encouraging to see that 593 jobs were saved through examinership last year, today’s index points towards the fact that the economic impact of Covid-19 has not yet been fully realised," said Neil Hughes, who is managing partner at Baker Tilly. 

“Companies are being kept on life support with the help of the Irish Government, the warehousing of Revenue debt, and the forbearance of creditors," said Mr Hughes. 

He predicted that examinerships will play an increasingly larger role in helping businesses to survive as the crisis develops and that "many businesses will need to restructure to enable them to operate and succeed into the future”.

"It is anticipated that examinership will be a tool that will be deployed to support this process in the second half of 2021 as Covid-19 supports begin to be phased out and the full effect of Brexit on trade and supply chains is felt," he said.  

Successful exits

Baker Tilly said its index showed that the number of 593 jobs saved in 2020 was little changed from 2019. The 2020 number included retail, wholesale, and aviation jobs.

It cited the successful exits from examinership by CityJet, Supreme Deliveries, and distributor Dublin Food Sales. 

“With many businesses historically profitable before enforced lockdowns, examinership may prove to be a viable option for businesses facing short-term challenges," said Mr Hughes. 

Last week, Deloitte said that the number of insolvencies last year during the pandemic showed only a small increase from 2019, as Government business supports kept the figures artificially low.

Deloitte said that services firms, which include financial services firms, accounted for the largest number of insolvencies last year.

Company insolvencies in services also included failures in health, fitness, and beauty firms.

Other experts have warned it could be late into 2022 before the full toll of insolvencies from the Covid-19 crisis becomes clear.