Corporate insolvencies rise in Q3 2016; services sector sees 104% increase - Deloitte
Overall insolvencies up 3% on Q3 2015
The total number of corporate insolvencies to the end of Quarter 3 2016 have totalled 765, according to the latest analysis from Deloitte and published on www.insolvencyjournal.ie. This represents a 3% increase on the same period in 2015 and is a reversal of the decreases seen in the first half of 2016. The total number of insolvencies in the third quarter of the year alone was 255, an increase of 18% on the equivalent period last year.
An analysis of industry sectors shows that the services sector experienced the most corporate insolvencies so far this year, with 220 (29% of the total), up 104% from the same period last year where there were 108 insolvencies. This is followed by the construction industry at 133 (17%), up from 92 last year, an increase of 45%. The hospitality industry was third with 84 (11%) corporate insolvencies, largely unchanged from the previous year. The retail industry was fourth with 76 (10%), down 29% on 2015.
Commenting on the figures, David Van Dessel, Partner in Deloitte Restructuring Services, Deloitte said: “Looking at the year to date, the results show the that the total number of corporate insolvencies is beginning to level out somewhat and we are likely seeing a more realistic picture of corporate insolvencies in Ireland, following a period of heightened activity during and following the recession.
“However, when comparing Q3 alone with the same period in 2015, insolvencies have increased by almost a fifth. Furthermore, we have observed a very significant rise in insolvencies the services sector. Therefore, the level of insolvencies have stopped falling. It is clear that the upturn in economic conditions has not lifted all boats. While many companies survived through the eye of the recession the pressure that factors such as rising costs and a more cautious consumer bring means that companies have succumbed before the upturn can have a meaningful impact on their business.”
Of these 765 corporate insolvencies, creditors’ voluntary liquidations accounted for the majority with 448 recorded in the period (59%). This is down 10% from the same period last year where there were 497 creditors’ voluntary liquidations. Receiverships accounted for 274 (36%) of the total corporate insolvencies so far in 2016, up by 79 appointments from 195 in the same period last year.
There were 32 court liquidator appointments in the nine month period, which is similar to the same period in 2015 where there were 34 appointments.
Examinerships continue to remain at low levels. Just 11 examiners have been appointed in 2016, just 1% of insolvency appointments for the period. This level of examinership take-up is consistent with the comparable periods and shows that the introduction of the 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 in Deloitte Restructuring Services, commented: “The number of insolvencies in the services sector clearly reiterates the importance of company directors addressing solvency issues as soon as possible. Early action by business owners is imperative for successful restructuring. Furthermore, the recent successful examinership of Debenhams shows that where a business is viable, examinership is a very effective tool to rescue the company with.
“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. This is a cheaper option with less court involvement that affords struggling companies a real chance at survival.”
Geographically, the highest number of corporate insolvencies in the period was recorded in Leinster with two thirds (66%) of the total appointments. This is a slight increase on the same period last year where Leinster had approximately 64% of all corporate insolvency appointments. Munster had 23% of appointments, up from 21% the previous year, while Connaught was consistent with last year at 9%. Finally, Ulster with just 3%, was down from 6% with last year.
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