Business

Corporate insolvencies reach highest level in five years after 25% rise in 2023

Total of 663 insolvencies last year, with numbers in hospitality and construction jumping 62%, Deloitte Ireland finds

There were 59 retail sector insolvencies in 2023, up from 48 the year before. Photograph: iStock

Laura Slattery
Thu Jan 4 2024 - 06:00

Corporate insolvencies reached their highest level last year since 2018, with the hospitality and construction sectors both seeing a 62 per cent rise, according to an analysis by professional services company Deloitte.

Some 663 corporate insolvencies were recorded in 2023, according to statistics compiled and published by Deloitte Ireland, with this number up 25 per cent on the 530 total recorded in 2022.

A total of 33 small and micro-companies availed of the new small business rescue regime – Small Company Administrative Rescue Process (Scarp) – with the scheme having a success rate of 78 per cent, saving 211 jobs. Five of the Scarps were unsuccessful, meaning they ended in liquidation, leading to 70 job losses. Some 10 Scarps are ongoing, with 178 jobs in the balance.

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Since the introduction of Scarps in December 2021, there have been a total of 55 Scarp appointments, saving almost 600 jobs.

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“This year’s statistics show a return to pre-pandemic insolvency activity levels with cautious consumer sentiment, cost inflation and higher interest rates starting to impact many businesses,” said James Anderson, turnaround and restructuring partner at Deloitte Ireland.

“Given the high rate of successful outcomes to date, it is evident that Scarp is an effective process which provides SMEs with a timely and cost-effective opportunity to restructure.”

Creditors’ voluntary liquidations (CVLs) continue to account for the majority of insolvencies, with 470 or 71 per cent of the total occurring in 2023. This compared to 383 or 72 per cent of the total in 2022, marking a rise of 23 per cent. Court liquidations accounted for 38 of the insolvencies, while there were some 106 corporate receiverships and 16 examinerships.

Meanwhile, there was a total of 1,494 members voluntary liquidations (MVLs), with the majority relating to subsidiary companies and special-purpose vehicles in the financial services, aviation, pharmaceutical and tech sectors.

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Financial services companies accounted for 93 insolvencies – more than one-third of the services sector total of 261 insolvencies – while technical and professional services saw 36 insolvencies and real estate insolvencies came to 32 for the year. There were also 23 insolvencies among fitness and beauty companies.

The hospitality sector recorded 99 insolvencies, representing 15 per cent of the total, Deloitte said. This was a “substantial increase” when compared with the 61 hospitality insolvencies seen the year before. The industry was hard hit by both rising energy and labour costs and the impact of the higher cost of living on discretionary spending by consumers during the year.

Amid increased material costs, the construction industry recorded 89 insolvencies, a jump on the 55 seen in 2022, while there were 59 retail industry insolvencies, up from 48 the year before.

Laura Slattery

Laura Slattery

Laura Slattery is an Irish Times journalist writing about media, advertising and other business topics

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