Company insolvencies surge as pandemic takes its toll

Fresh appeal for SME supports to continue as two reports highlight worrying rate of business failure

The figures show a 45% increase in insolvencies to 371 companies in the first half of this year.

Renewed calls for the continuation of widespread supports for SMEs have been made amid fears of an escalation in company failure rates.

While the Government has moved to push into law new rescue legislation aimed at making it cheaper, easier, and faster for small companies to restructure if in trouble, there is rising concern that insolvency rates will increase when Covid supports begin to be phased out. The hospitality sector is a particular area of concern.

New figures from credit risk analyst CRIFVision-Net show a healthy rise in the number of newly-registered companies in the first half of this year, but an equally high number of company failures.

Startups are up — but so are insolvencies

The figures show a 42% year-on-year rise — to just under 14,000 — in startup firms in the first half of 2021.

However, they also detail a 45% increase in insolvencies — to 371 companies.

This contradicts recent Deloitte figures, which showed a near 40% drop in insolvency rates during the first half. However, both surveys flag deep concerns over the potential for a rise in the number of firms companies going out of business once Covid supports begin to be removed.

A new wave of entrepreneurial opportunities

“Strong growth in startups across most industries suggests that the Irish business community has identified a new wave of entrepreneurial opportunities during lockdown and are pursuing their development, a marker of businesses’ positive expectations for the future,” said CRIFVision-net managing director Christine Cullen.

Despite the wave of entrepreneurial startups and early signs of recovery, 'many businesses are struggling, and will continue to struggle,' according to Christine Cullen, managing director of CRIFVision-net. 

“However, despite these early signs of recovery, many businesses are struggling, and will continue to struggle for the foreseeable future, as evidenced by the increase in company insolvencies,” Ms Cullen said.

However, insolvencies will increase

“These insolvencies are likely to increase, particularly in the hospitality sector, as government supports are rolled back and credit lines dry up,” she said.

Therefore, every support should be given to protect new companies and ensure their growth and development.

“Time and time again, Irish SMEs have proven to be an invaluable source of employment and revenue for the Irish economy; continuous dialogue between industry and policymakers is now needed to continue growth into the future,” she said.