According to analysis by PwC, the direct economic damage of business failures in Ireland is expected to exceed €2 billion for the year 2022. Over 350 companies have declared insolvency so far this year, with associated debts outstanding of more than €1.6 billion. If insolvencies rise to their long-term average norms, the annual direct economic damage of business failures in Ireland could reach €6-€7 billion.
PwC warns that the current climate of business uncertainty is likely to continue for the foreseeable future, leading to an increase in business failures. It is estimated that almost one in 10 businesses are at risk of failure in the next 12 months. This is a significant increase from the start of the pandemic when that figure stood at one in 20. The sectors most at risk are retail, hospitality, and leisure.
The impact of Covid-19 has been unprecedented and has led to an increase in business failures globally. In the first half of 2020 alone, there was a 40% increase in corporate insolvencies compared to the same period last year. PwC’s Insolvency Index shows that Ireland is following this trend with an increase of 26% in corporate insolvencies in the first half of 2020.
While the current situation is uncertain, there are steps that businesses can take to reduce their risk of failure. These include reviewing their business model, diversifying their product offering, and making use of digital tools and technology to reach new markets.