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HomeTop Business NewsEmerald Economy in Crisis: Business Failures Skyrocket by 54% in H1 2023

Emerald Economy in Crisis: Business Failures Skyrocket by 54% in H1 2023

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Business Failures Surge in Ireland, Insolvency Levels Reach New Highs

There has been a significant increase in business failures in Ireland during the first half of this year, with insolvency levels rising by 54% compared to 2022. According to the latest data from PwC’s Insolvency Barometer, a total of 321 businesses have failed so far in 2023, up from 209 in the same period last year. Insolvencies in the second quarter alone increased by 55% compared to the second quarter of 2022.

Over the past 12 months, the rate of business failures has risen to 25 companies per 10,000, compared to a historic low of 14 per 10,000 at the end of 2021. However, it is important to note that overall business failure rates still remain relatively low. For instance, the pre-pandemic insolvency level in 2019 was 36 per 10,000.

PwC predicts that business failure rates are likely to continue rising in the coming year, particularly as the Revenue’s Debt Warehousing Scheme unwinds. The report highlights that more than 6,000 companies that took advantage of the scheme still owe a total of €1.9 billion and will need to negotiate phased payment agreements with the Revenue before May 2024. Recent figures released by the Revenue indicate that 510 companies eligible for the tax debt warehousing scheme have been liquidated in recent years, leaving over €55 million of tax debt outstanding (€50 million of which is warehoused).

“As we approach the May 2024 deadline, we anticipate that this number will increase,” PwC stated. “The total warehoused debt represents around 2.5% of projected total exchequer receipts in 2023. In addition to the 6,000 companies with larger liabilities, owing an average of €300,000, a further 57,000 companies owe a total of €300 million, but at a much smaller level, averaging €5,000.”

PwC’s report also highlights specific sectors that have experienced higher failure rates. The arts, entertainment, and recreation sector, for example, had a failure rate nearly three times the national average over the past 12 months, with an annual failure rate of 63 per 10,000 businesses. The health and hospitality sectors followed closely behind, with annual failure rates of 48 and 41 per 10,000 businesses, respectively.

Ken Tyrrell, Business Recovery Partner at PwC Ireland, attributed the majority of the increase in business failures to SME liquidations, which have been largely influenced by cost inflation, rising interest rates, and the accumulation of legacy debt. Tyrrell also noted that lender enforcement remains low, and with many companies utilizing the Revenue’s Debt Warehousing Scheme, he expects more companies to turn to formal restructuring processes such as examinership and SCARP to address their legacy debts.

In conclusion, the rise in business failures in Ireland during the first half of this year is a cause for concern. The impact of the pandemic, coupled with ongoing economic challenges, has put many businesses at risk. As the Revenue’s Debt Warehousing Scheme comes to an end, it is crucial for companies to address their outstanding debts and explore viable restructuring options to ensure their survival in the challenging business landscape.

Thomas Lyons
Thomas Lyons
Thomas, the founder and chief editor at Top Rated, harbours a deep-seated passion for business, news, and product reviews. His thirst for knowledge and experience has led him on a journey across the length and breadth of the country, enabling him to garner a wealth of insight. At TopRated.ie, his sole aim is to deliver meticulously researched news and provide impartial reviews of fact checked Irish companies, thus helping readers make well-informed decisions.

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