Total number of corporate insolvencies levelling out in H1 2016
Services industry sees 93% increase
There was just seven examiners appointed in the first half of 2016
The latest analysis from Deloitte suggests that corporate insolvencies may be levelling out in Ireland. The number of appointments in H1 2016 totalled 510, a 3% decrease on the same period in 2015, according to the latest figures released today and published on www.insolvencyjournal.ie. The service industry, which recorded the most insolvencies in H1 2016 with 135 appointments, saw a 93% increase on the same period last year.
Creditors’ voluntary liquidations decreasing; receiverships on the up
Further analysis shows that of these 510 corporate insolvencies, creditors’ voluntary liquidations accounted for the majority with 313 recorded in the period (61%). This is down 14% from the same period last year where creditors’ voluntary liquidations accounted for 362 of the 525 appointments recorded. Receiverships accounted for 165 (32%) of the total corporate insolvencies in H1 2016, up 27% on the same period last year. There were 25 court liquidator appointments in the current period, down by only one from the same period last year. In the majority of these cases the Revenue Commissioners took the petition to wind up.
Examinerships continue to remain at low levels and H1 2016 saw only seven examiners appointed, well under 2% of all appointments. This level of examinership take-up is consistent with the comparable periods and shows that the introduction of new legislation in early 2014 has not had the intended effect of encouraging more struggling SMEs to avail of this more cost-effective and accessible option.
David van Dessel, Partner, Restructuring Services, Deloitte commented: “This large increase in receivership appointments represents an interesting change in the mix of insolvencies. However, despite this change, we are still not seeing an uptake in the levels of examinerships. The recent successful examinership of Druid’s Glen shows that where a business is viable, examinership is a key tool to promote survival and is a real proof point of the benefits of this option. For smaller SMEs there are still options to explore this type of restructuring through use of the “super-lite examinership” - the s.450 schemes of arrangement. Typically this is a less costly option that involves less court involvement but affords struggling companies a real chance at survival.”
Geographically, the highest number of corporate insolvencies in the period was recorded in Leinster with 67% of total appointments. This is consistent with the same period last year where Leinster had approximately 64% of all corporate insolvency appointments. In the current period Munster had 21% of appointments, Connaught 9%, and Ulster just 3%, again showing consistency with the same period last year.
Looking at the industry breakdown, it was the service industry which recorded the most insolvencies in H1 2016 with 135 appointments (26%). This is a 93% increase on the same period in 2015 when only 70 appointments were recorded. The construction industry recorded the second highest level of appointments with 89 (17%). This is an increase of 46% from last quarter.
Van Dessel commented: “In previous years, the construction industry consistently had the largest number of insolvency appointments and it wasn’t until 2015 that the service industry overtook it for most appointments recorded. This indicates that while the level of insolvencies in the construction industry aren’t at the peak levels seen since 2009 the level of corporate failure in this industry is only now starting to slow down. Indeed the ripple effect of the financial crisis is now being seen in the service industry with the large percentage increase in insolvencies from last year. Initially the construction industry was worst hit and over time other industries have felt the effects of the crash.”
“The fact that most corporate insolvencies are recorded in Dublin shouldn’t come as a surprise as business activity is concentrated in this region. For the same reason, economic recovery is most strongly seen in the Dublin area but shouldn’t necessarily be assumed to be occurring at the same pace in other areas around the country." - David Van Dessel
Van Dessel continued: “Looking generally at recent results it may be that we are now entering a period where the total number of corporate insolvencies begins to level out somewhat. Reflecting on the overall trend of each year since 2007, the highest total number of insolvencies was seen in 2012 with 1,684 and the total number recorded each year has been declining consistently since then. While we aren’t seeing the low levels of insolvencies recorded during the so-called Celtic Tiger years, it may be that those particularly low numbers seen in 2007 and 2008 were outliers themselves and the levels of this year and last are a more realistic baseline to compare future levels to. This may be reflected in the low percentage difference between the current period and the same period in 2015.”
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