FOUR COMPANIES a day went out of business in 2009, with a similar rate of insolvency expected for most of 2010, according to new data compiled by InsolvencyJournal.ie.
The figures show that 1,406 Irish businesses were declared insolvent last year, as hundreds of construction companies were joined by household names such as O’Brien’s Sandwich Bars and Budget Travel on the list of liquidations.
The year ended badly for businesses, with 156 companies going bust in December – the highest total of any month last year – and an indication that dole queues are likely to remain long in 2010.
An extremely tough trading environment for businesses across all sectors in 2009 led to an 82 per cent surge in the number of insolvencies compared to 2008, while the number of failed businesses was 287 per cent higher than that recorded in 2007.
The construction industry was by far the worst-affected sector, with 453 construction companies declared insolvent as developers’ debts spiralled out of control.
The monthly number of construction firms going bust also peaked in December, with 49 construction insolvencies, InsolvencyJournal.ie said.
This beat the previous peaks of 44 construction failures in both February and August.
The services sector was the next hardest hit, with 278 insolvencies, while a plunge in consumer spending led to 201 retail companies collapsing in 2009.
A high number of insolvencies was also recorded in the hospitality sector, where 154 companies were declared insolvent, and in manufacturing, where 123 companies went out of business.
The motor industry was also especially badly hit, with 58 insolvencies, as new car sales evaporated.
Corporate recovery specialist Ken Fennell, from Kavanagh Fennell, the accountancy firm behind the website, said that he expected the number of insolvencies among retailers, hotels and restaurants would continue to climb next year, while the rate at which businesses across all sectors are failing will stay high as business conditions remain severe.
“For the coming year, the outlook remains pessimistic as the rate of insolvency will be similar to 2009, with a peak mid-year followed by a gradual reduction in the last quarter of 2010,” Mr Fennell said.
InsolvencyJournal.ie described the rapid increase in company failures in 2009 as “staggering”.
The 1,406 insolvencies last year compares to 773 insolvencies in 2008 and just 363 cases at the height of the boom in 2007.
But with so many construction companies having already gone out of business, the number of insolvencies in this sector is expected to level off in 2010.
“Most of the big guys have gone now,” Mr Fennell said.
Figures from the website show that the number of judgments of more than €10,000 against limited companies peaked at 69 in September. There were 618 judgments of more than €10,000 registered against limited companies in the first 11 months of the year.
Despite the overall rise in company insolvencies, there has been a 40 per cent drop in the number of examinerships. This is the process whereby a company is given court protection from its creditors while it tries to find a way to survive.
Only 37 companies applied for court protection in 2009, which Mr Fennell said could be attributed to demands from the High Court for higher standards in the examinership process.
Earlier this year, Mr Justice Peter Kelly called for more detail in the independent accountant reports that are presented at an examinership hearing, as fewer companies were successfully emerging from the process. O’Brien’s Sandwich Bars was the most high-profile example last year of a failed examinership, when the rescue bid for the company ended in liquidation in October.
However, Smart Telecom and Chartbusters were among the 46 per cent of companies that went into examinership and survived by finding new buyers or investors.
