Insolvency levels rise 33% in first 9 months of 2023

Total number of insolvencies expected to be in the region of 650 by the end of 2024.

Business insolvency levels in Ireland have risen 33% in first nine months of 2023, according to PwC’s Q3 2023 Insolvency Barometer.

Insolvency levels rose by 33% in the first three quarters of 2023 compared to the same period last year, up from 352 insolvencies for the nine months to end September 2022 to 468 for the nine months to September 2023. 

“We expect the debt warehousing build-up to increase business failure rates as companies attempt to enter negotiations with Revenue ahead of the May 2024 deadline”

However, in our experience, quarter 4 has historically been the busiest period for business failures.  PwC estimates that the total number of insolvencies for 2023 will be in the region of 650, compared to 539 for 2022.

Failure rates at historically low levels

The PwC Insolvency Barometer reveals an annual failure rate of 25 companies per 10,000. This is 79% higher than the lowest level of insolvencies recorded in 2021 (14) but still remains lower than pre-pandemic levels. While there has been an increase, business failures remain at historically low levels. The pre-pandemic level of insolvency was 36 per 10,000 recorded in 2019.

Insolvency levels in quarter three of 2023 (145) are on par with the same period (July – September) of 2022 (143). However, insolvency levels for Q3 2023 are 48% higher than Q3 2021 (98). 

Quarterly insolvencies fell by 16% in Q3 of 2023 (145) when compared to Q2 of 2023 (172).

Monthly failures are broadly increasing since early 2021.  For example, July 2023 had a significant amount of monthly insolvencies (65) compared to 54 insolvencies in April. However,  August and September showed a downward trend but the summer months consistently exhibit lower levels of activity compared to the rest of the year.

SCARP appointments low

In existence for almost 2 years, SCARP (Small Company Administration Rescue Process) appointments remain relatively low (40 in total), with SCARP accounting for less than 4% of all insolvencies during the last 2 years. 

However, SCARP applications are expected to increase as the 6,000 companies with an average warehoused debt of c. €300k look to enter into negotiations with the Revenue ahead of the May 2024 deadline. 

Similar to the last few years, in the nine months to September 2023 the arts, entertainment and recreation sector as well as the hospitality sector remain the two largest sectors with business failures. In absolute terms the retail sector has seen the most business failures with 116 in the year to date. 

In terms of Counties, Dublin had the highest total number of business failures with 61% of the overall total during the third quarter of 2023.  Dublin has on average accounted for roughly half (50%) of total insolvencies for the past number of years.  Counties Louth and Meath have the second and third highest business failures per 10,000 businesses for the first three quarters of 2023.

UK insolvency figures fell for the first time since Q1 of 2021.  For example, on a per 10,000 business basis, Q2 2023 (41.63) has seen the first decline in the UK business failure rate since Q1 2021. The UK insolvency rate is still 1.9 times higher than in Ireland. 

“In an environment where inflation remains high and the cost of doing business is not abating, insolvency levels are on the rise, though compared to pre-pandemic levels, are still relatively low,” said Ken Tyrrell, Business Recovery Partner, PwC Ireland.

“Reaching about 650 by the end of the year, we do expect levels to continue to rise into 2024. We expect the debt warehousing build-up to increase business failure rates as companies attempt to enter negotiations with Revenue ahead of the May 2024 deadline. 

“In the face of market disruption, geopolitical change and high profile challenges across different industries, businesses continue to feel the effects of an uncertain market with restructuring activity rising and risk of shocks remaining. Creating a cash-conscious culture is critical to ensuring organisations can improve their resilience and flourish in the future. This is a collective responsibility from the boardroom and across the business – not just the finance team or treasury to make decisions impacting cash.”