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Decrease in level of corporate insolvencies in H1 –Deloitte

Corporate Insolvency Statistics H1 2021

A total of 169 corporate insolvencies were recorded in Ireland in the first half of 2021, according to the latest insolvency statistics published by Deloitte. This represents a decrease of 38% from H1 2020, when 273 insolvencies were recorded.

On a quarterly basis, a total of 58 corporate insolvency incidents were recorded during Q2 2021, which was a marked reduction of 48% when compared to Q1 2021, when there were 111 incidents.

Commenting on the figures, David Van Dessel, Partner, Financial Advisory at Deloitte said:

“While the reasons behind the difference in corporate insolvency activity between Q1 and Q2 2021 are unclear, it is generally accepted that the full effects of Covid-19 on the Irish economy have not fully materialised in terms of corporate insolvencies. The continued low level of corporate insolvency activity is likely to be influenced by the broad range of government measures introduced to support businesses during the pandemic.

“The current crisis has created a significant challenge for many otherwise viable Irish companies and we anticipate that the first half of 2022 will paint a more accurate picture of how the Covid-19 pandemic has influenced the economy and the knock-on effect on our SME sector.”

Sectoral Analysis

As in previous reports, the Services sector recorded the highest number of corporate insolvencies in H1 2021 at 73, representing 43% of total insolvencies recorded during the period. This is a decrease of 23% when compared to H1 2020, when the Services sector experienced 95 insolvencies.

Within the Services sector, Financial Services experienced 51 insolvencies, representing 70% of all insolvencies recorded in the Services sector in H1. Education saw 4 insolvencies during the period (5%), followed by Utility & Gas Supply with 3 insolvencies (4%), Sporting Activities with 2 insolvencies (3%), while Agriculture, Betting, Beauty, Hairdressing, IT, Medical Practice, Mining and Public Administration all experienced 1 insolvency, each representing 1% of all insolvencies in the sector.

Outside of the Services sector, the Construction sector recorded 31 insolvencies during H1, representing 18% of total insolvencies recorded during the period. This is an increase of 15% when compared to H1 2020, when a total of 27 insolvencies were recorded in the Construction sector.

The Retail sector recorded just 20 insolvencies, representing 12% of all insolvencies recorded during H1. This is a notable decrease of 61% when compared to H1 2020, when 51 insolvency incidents were registered in the sector. “Leaving aside this particular snapshot, we continue to see significant change in the retail sector as a result of the pandemic, with store closures continuing to accelerate e-commerce activity and the associated shift in consumer behaviour,” said Van Dessel. “This can negatively impact liquidity-constrained retailers who have had to consider large-scale permanent store closures and insolvency.”

The Hospitality sector recorded 17 insolvencies in H1, representing 10% of overall insolvencies during the period. This is a sharp decline of 65% compared to H1 2020, when 48 insolvencies were recorded in the sector. Of the 17 Hospitality sector insolvencies reported so far in 2021, 10 related to hotels and inns, compared to 16 in H1 2020; 5 related to companies operating in the food services sector (i.e. restaurants & catering companies), compared to 29 in H1 2020; and only 2 insolvencies were recorded for companies operating as bars or pubs, compared to 3 in H1 2020.

“Hospitality has been one of the hardest-hit sectors by the pandemic, including of course the restaurant and pub sector who continue to rely on outdoor dining,” said Van Dessel. “While mobile ordering and take-away have been widely adopted by many restaurants, some may fail to reopen their doors. With these areas particularly vulnerable to ongoing government lockdown measures and restrictions, as we have seen in recent days, we may see increased levels of failures, particularly after the cessation of government subsidies.”

The Manufacturing sector recorded 12 insolvencies in H1, representing 7% of total insolvencies. The Transport sector recorded 8 insolvencies (5% of total) and the Wholesale sector recorded 5 (3% of total). The level of insolvencies recorded in these sectors in H1 2021 had all decreased compared to H1 2020.

Age Profile

From an age profile perspective, only 14% (23) of insolvencies recorded during the first half of 2021 relate to companies less than five years old; 16% (27) are in the 5-10 years bracket; 31% (52) are in the 10-20 years bracket; 21% (36) are in the 20-30 years bracket; 8% (14) are in the 30-40-years bracket; and 10% (17) are over 40 years old.

Van Dessel commented: “The age profile analysis, which reflects a similar position to that of previous years, suggests that the level of insolvency for start-ups – that is, businesses in the zero-to-five-years bracket – is lower than one might expect, given the inherent fragile nature of start-ups. In addition, the numbers point to a relatively even spread of insolvency activity throughout the different age profiles and a reduction in insolvency activity can be seen in the over 20 years bracket.”

Regional focus

Geographically, the highest number of corporate insolvencies in the first half of 2021 was recorded in Leinster, with 59% of total insolvencies (100). 26% of total insolvencies were recorded in Munster (44), 9% in Connaught (15) and 6% in Ulster (10).

Compared to H1 2020, the number of insolvencies has dropped in Leinster & Munster, while increasing in Connacht and Ulster.

Insolvency process

As in previous years, Creditors’ Voluntary Liquidations (CVLs) accounted for the majority of insolvencies in the first half of 2021. A total of 109 CVLs were recorded in H1 2021, representing 64% of overall insolvencies during H1 2021; this is down from 214 in H1 2020, a decrease of 49%.

Corporate Receivership saw the only increase in activity for the first half of 2021, with 37 (22%) recorded in this period, compared to 27 (10%) recorded in H1 2020.

The level of High Court wind-up petitions declined by 20%, with 20 (12% of total insolvencies) recorded in H1 2021, compared to 25 in H1 2020. This may be the result of increased levels of debt introduced in respect of statutory demands and winding-up petitions due to the Covid-19 pandemic, Deloitte noted.

The number of Examinership appointments has, similarly to previous years, remained very low. There were just 3 Examinership events recorded in H1 2021, compared to 7 in the same period in 2020.

“We are on the cusp of a new age for SME Corporate Rescue, with the imminent introduction of new Corporate Rescue legislation specifically aimed at SMEs,” Van Dessel noted. “30 years after the introduction of the Examinership process, with such low levels of Examinership activity, the Government is to be commended for the imminent introduction of the Small Company Administrative Rescue Process, or SCARP. As part of this process, directors maintain control of the business and the process can be commenced and completed without need for a court application.

“We would advise any business in difficulty to ensure you keep your creditors informed; maintain proper books of account and regularly review the financial performance of the company by preparing management accounts on a regular basis; and, perhaps most importantly, seek professional advice at the earliest opportunity to ensure you have sufficient time to plan and implement a robust recovery strategy.”

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

Claire Quinn
Deloitte
087 977 7783
cquinn@deloitte.ie

 

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Insolvency Q1 2021 Statistics

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