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8% increase in level of corporate insolvencies in Q1 2022

Corporate Insolvency Statistics Q1 2022

A total of 120 corporate insolvencies were recorded in Ireland in the first quarter of 2022, according to the latest insolvency statistics published by Deloitte. This represents an increase of 8% from the same quarter in 2021, when 111 incidents were recorded. Deloitte believes that this demonstrates a gradual return to pre-pandemic levels of insolvency activity. Looking forward to the rest of 2022 and beyond, this steady increase in insolvency activity is expected to continue and to ultimately surpass the pre-pandemic level, as the full economic impact of the pandemic materialises.

Commenting on the figures, David Van Dessel, Partner, Financial Advisory at Deloitte said: “While there has been only a small increase in insolvency activity of 8%, Director led ‘Creditors Voluntary Liquidation’ (CVL) activity actually reduced by 23%, when compared to Q1 2021. However, against the fall in CVL activity, we continue to see increased Receivership activity. Directors are reminded that when faced with financial difficulty, early action on their part has the most significant influence on a successful turnaround. And with the recent introduction of the ‘(Small Company) Administrative Rescue Process’ (‘SCARP’), which is specifically tailored for SMEs (T/Over<€12m, Net Assets<€6m, Employees<50), Directors of financially distressed SMEs now have a choice of tools to execute a cost-effective turnaround, incorporating debt write off and restructure.”

Insolvency processes

Creditors’ Voluntary Liquidations (CVLs) accounted for half of the insolvencies in the first quarter of 2022, with a total of 60 CVLs. This represents an unexpected decrease of 23% from Q1 2021, when 78 CVLs were recorded.

43 Corporate Receiverships were recorded in Q1 2022, representing 36% of the insolvencies in the quarter. This marks a significant increase in Receivership activity when compared to Q1 2021, with the figure almost doubling from 23 in Q1 2021 to 43 in Q1 2022. This continues a trend seen through 2021 of increased levels of Receivership activity, which is likely due to a backlog of receiver appointments arising from moratoriums that were in place up to early 2021.

The level of Court Liquidations remained consistent, with 10 (8% of total insolvencies) recorded in Q1 2022. This is in line with the 8 (7%) recorded in Q1 2021.

The number of Examinership appointments recorded in Q1 2022 was 7 (6% of total insolvencies), which is an increase from 2 (2%) in Q1 2021.

Q1 2022 saw the first ‘Small Company Administrative Rescue Process’ (SCARP) appointment commence and successfully conclude. It will be interesting to follow the take up of the SCARP process for the remainder of 2022, which enables SMEs struggling with excess debt to continue to trade while negotiating debt write off and debt restructure with creditors.

Industry focus

Similar to previous quarters, the 'Services Sector' recorded the highest number of corporate insolvencies in the first quarter of 2022 at 85, representing 71% of all insolvencies during the period. This marks a substantial increase on the same quarter in 2021, during which the Services sector saw 52 insolvencies (47%).

Within the 'Services Sector', Financial Services saw 46 insolvencies, representing 38% of insolvencies recorded in Q1 2022. The Real Estate sector recorded 23 insolvencies in Q1 2022, representing 19%. Given there were only 37 insolvencies in the Real Estate Sector in the whole of 2021, this is a notably high amount for the first quarter of 2022.

The Entertainment industry reported five insolvency incidents, which included a virtual gaming and party company, an angling company, and a company that operated amusement activities. Agriculture Services, Health & Social Work and Fitness & Beauty sectors all recorded two insolvencies in the first quarter of 2022.

Outside the 'Services Sector', the Construction sector saw 10 insolvencies in Q1 (8% of total), a decrease of 58% when compared to the same period in 2021, when 24 insolvencies were recorded in the Construction sector.

The Retail sector recorded 10 insolvencies in Q1, representing a small decrease from Q1 2021 when 13 were recorded. However, when compared to pre-pandemic activity, such as Q1 2020 when there were 34 Retail insolvencies, it suggests, similar to other business sectors, that the number of retail insolvencies could be artificially low.

The Hospitality sector saw just four insolvencies in the first quarter of 2022, compared with 11 in Q1 2021, representing a 64% decrease. All four insolvencies related to companies operating bars or restaurants.

The Transport sector reported just three insolvencies in Q1, while the Wholesale sector and Manufacturing sector reported two each. There were four insolvencies in ‘Other’ sectors.

Age profile

From an age profile perspective, 18% (21) of all insolvencies recorded during the first quarter of 2022 relate to companies less than five years old. 32% (38) relate to companies in the 5-10 years bracket; 25% (30) were in the 10-20 years bracket; 13% (15) were in the 20-30 years bracket; 12% (14) were in the 30-40 years bracket; and 2% (2) were over 40 years old. The age profile analysis indicates that half of insolvent companies in Q1 2022 were in the 0-10 year-old bracket. This is a significant increase from Q1 2021 when the 0-10 age bracket accounted for just 28% of the total insolvencies. When one sees increased insolvency activity in ‘younger’ companies, it could be interpreted as a sign of increased economic challenge.

Regional spread

Geographically, and in line with previous reports, the highest number of corporate insolvencies in Q1 2022 was recorded in Leinster, with 88 insolvencies (73% of total). Munster saw 20 insolvencies (27% of total), Connaught saw 11 insolvencies (9% of total) and there was one insolvency in Ulster (Republic of Ireland only).

When comped to Q1 2021, the number of insolvencies in Leinster saw a significant increase from 67 to 88 in Q1 2022, representing a 31% increase. In Munster, the number of insolvencies decreased by 26%, from 27 in Q1 2021 to 20 in Q1 2022. Connaught recorded the same number of insolvencies with 11 in both Q1 2021 and Q1 2022, while Ulster (ROI Only) recorded a decrease from 6 in Q1 2021 to 1 in Q1 2022.

Pre-Pandemic vs Post-Pandemic

While it is evident that insolvency activity is slowly returning to pre-pandemic levels, it should be noted that this does not take into account the additional Companies who are struggling financially as a result of the Pandemic. Therefore, it is likely that the numbers will continue to rise and surpass the pre-pandemic level of activity.

There were 847 insolvencies in 2017, 767 insolvencies in 2018 and 568 in 2019. When compared with the 575 insolvencies in 2020 and particularly compared with the 401 insolvencies in 2021, it strongly suggests that the current numbers remain artificially low.

Advice on selecting an Insolvency Practitioner

According to the insolvency statistics from Deloitte, in 2021 alone there were over 100 different Insolvency Practitioners appointed across a total of 401 insolvencies. Given the vast number of Insolvency Practitioners available in Ireland, which number is in the multiple of hundreds, it is important for Company Directors to satisfy themselves that their chosen Insolvency Practictioner is a specialist with significant experience and a track record of successfully completed insolvencies behind them.

It is particularly important when selecting an Insolvency Practitioner to remember that Insolvency work is highly regulated, with Prefessional Fees being subject to either creditor or court approval. Most Insolvency Practitioners, irrespective of their level of experience, adhere to the same “High Court approved” hourly fees, therefore by selecting a more experienced Isolvency Practitioner, a Director will increase their chances of having a successful turnaround without increasing costs.

ENDS

 

Issued by Murray on behalf of Deloitte Ireland

For Further Information Please Contact

Orna Clarke
Murray
01 498 0300
087 677 0360
oclarke@murraygroup.ie

Olwyn Flanagan
Deloitte
oflanagan@deloitte.ie

 

About Deloitte

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In this press release references to Deloitte are references to Deloitte Ireland LLP. The information contained in this press release is correct at the time of going to press. Deloitte Ireland LLP is the Ireland affiliate of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NSE LLP do not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms.
 

Insolvency Q1 2022 Statistics

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