Corporate insolvencies saw 30% year-on-year increase in H1 2023, according to Deloitte.
A total of 329 corporate insolvencies were recorded in Ireland in the first half of 2023, according to the latest insolvency statistics published by Deloitte.
This represents an increase of 30% from the same period in 2022, when a total of 253 insolvencies were recorded.
“With the successful introduction of SCARP, directors of struggling SMEs now have a restructuring process that is bespoke for the SME sector”
On a quarterly basis, 186 corporate insolvencies were recorded during Q2 2023: a 30% increase when compared to Q1 2023, during which 143 insolvencies were recorded. Interestingly, today’s figures represent the highest quarterly level since Q1 2019 (195).
Although a notable annual rise, the figure points to a return to 2019 levels, before the impact of Covid-19 and related government supports for businesses. In H1 2019, 310 insolvencies were recorded. Insolvency activity remains approximately 30% below 2017 and 2018 levels.
A resilient economy
Although H1 2023 saw businesses face significant challenges, Deloitte partner David Van Dessell said the latest corporate insolvency stats are somewhat reflective of the resilience the wider economy continues to display.
Employment grew 4.0% in the twelve months to Q1 2023, with employment now also 20% higher than in 2017. Personal consumption increased 5.1% in Q1 2023 compared to Q1 2022, as consumers continue to spend despite the persistent inflation.
“Despite the economic impact of Covid-19 and the negative impacts of high inflation, soaring energy costs and rising interest rates, insolvencies remarkably are still only at 2019 levels, when the economy was in rude health and didn’t face the same economic headwinds.
“Although we have not yet seen a material fallout from the economic impact of Covid-19 or increased interest rates and inflation, it is evident from H1 2023 that we are moving towards pre-covid insolvency levels, after a period of artificially low levels. However, it is worth noting that we remain far below the levels of 2012-2018 when the average annual insolvency level was over 1,000. For 2023, a forecasted level of above 600 Corporate Insolvencies is anticipated.
“In all situations of financial distress, early action by company directors dramatically increases the chances of avoiding foreclosure and with the successful introduction of SCARP, directors of struggling SMEs now have a restructuring process that is bespoke for the SME sector.
Kate English, director, Financial Advisory at Deloitte further added: “The H1 2023 corporate insolvency stats mirror economic activity, perhaps to people’s surprise. Despite the growing challenges, a negative impact on economic growth or corporate insolvencies is yet to be clearly seen in data.
“Figures released from the Central Bank in June as part of their Financial Stability Review illustrated profit margins of SMEs had, for the most part, held steady or increased from March to September of last year as costs were passed through via price increases. However, given the time lag in data, inflation remaining sticky and further interest rate rises to come, businesses may increasingly feel the price pressures. Therefore, insolvency figures will be closely watched as we move through the second half of 2023 and into 2024.”
A total of 243 Creditors’ Voluntary Liquidations (CVLs) were recorded during H1, representing 74% of total insolvencies in the period. This represents a 43% increase from 2022 when 170 were recorded in the same period.
There were 41 Corporate Receiverships (12% of total), a 29% decrease from 58 in H1 2022.
There were 24 Court Liquidations in H1 2023 (7% of total) which represents a sizable jump from 13 in H1 2022.
Lastly, there were 17 SCARP appointments and four examinership appointments in H1 2023. When examinerships are combined with the new SCARP process – both being restructuring procedures – the total number of restructuring events in H1 2023 amounts to 21, which represents a 75% increase when compared with H1 2022 (12).
Looking to sector breakdown, in line with historical trends, the services sector recorded the highest number of corporate insolvencies during H1 2023, 128 or 39% of all insolvencies during the period. This is a decrease of 19% compared to H1 2022, when 159 insolvencies were recorded.
Within the services sector, financial services organisations recorded the largest share (33%), with 42 insolvencies recorded during H1 2023. There were 19 insolvency events for Companies in the technical and professional services industry, representing 15% of services sector insolvencies. The real estate sector recorded 13 insolvencies during H1, which is significantly down from 33 in the same period in 2022. The Fitness and beauty sector recorded 15, followed by Health and Social work with 10 and Education, Entertainment and other services accounted for the remaining 29 insolvencies in the services sector.
Outside the services sector, the construction sector recorded 50 insolvencies during H1, representing 15% of all insolvencies recorded during the period. This is a significant increase when compared to H1 2022, when a total of 23 insolvencies were recorded. However, today’s volume is similar to 2019 levels. There are a myriad of challenges facing the construction sector at present, with construction cost inflation for example sitting at 6.5% annually as of June 2023, down from 18.5% in June 2022.
The hospitality sector recorded 41 insolvencies during H1, representing a substantial rise from just 14 in H1 2022. Most of the hospitality insolvencies related to Restaurant and food service activities, with the remainder from bars, hotels and event catering activities. Fáilte Ireland’s May barometer highlighted the food & drink sector are expecting to experience the largest hit to profits this year of the hospitality sector due to rising operating costs.
29 insolvencies were recorded in the retail sector during H1 2023 (9% of total), which represents a 53% increase when compared with H1 2022, when a total of 19 insolvencies were recorded.
26 insolvencies were recorded in the manufacturing sector during H1 2023, representing 8% of total insolvencies; the transport sector recorded 13 insolvencies (4% of total); wholesale sector recorded 11 (3% of total), while the IT sector recorded 11 (3% of total), all representing an increase on the level of insolvencies seen in these sectors during H1 2022. There were 20 insolvencies in other business activities in H1 2023.
Companies in Leinster recorded 252 insolvencies during H1 2023, which represents 77% of total insolvencies, and is marginally up on H1 2022 when Leinster accounted for 72% of the insolvencies.
39 insolvencies were recorded in Munster representing 12% of total versus 18% of total in H1 2022.
Connaught saw 8% of the total insolvencies with 25 (7% in H1 2022) and Ulster was again the least prevalent with 13 (4% of total versus 3% in H1 2022).