Small Business

Saturday 26 July 2014

Fewer business failures a clear sign economy has stabilised

Peter Flanagan

Published 31/01/2013|05:00

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One of the most high profile business failures was music retail chain HMV, which went into receivership

THE number of companies going out of business fell by almost a quarter in January, providing another sign that the economy has stabilised.

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Figures from InsolvencyJournal.ie, a website run by accountants Kavanagh Fennell, show there were 107 business failures during the first month of the year. That is 22pc lower than the 137 companies that went under in January last year.

The latest figures mean that in the three months from the start of November, corporate insolvencies fell 14pc when compared with the same quarter a year ago.

Kavanagh Fennell's David Van Dessel said the numbers pointed to an overall contraction in the failure rate.

"We would expect to see a reduction in the overall level of corporate insolvencies in 2013 compared to 2012," he said. "We also envisage heightened examinership activity as a recovery model compared to liquidations, which will allow more companies to restructure and continue trading."

Despite the overall fall in insolvencies, the firm warned that there were still problems in industry.

"The high level of retail insolvencies in January does raise concern for the sector," said Mr Van Dessel.

"Despite strong trading in December, troubled retailers were mopping up what they could prior to year-end in advance of what were likely to be pre-planned closures."

Total retail sales have fallen by 25pc since the start of the recession.

January saw a rash of closures in retail, with HMV going into receivership, while clothing chain Pamela Scott went into examinership.

More companies are expected to go into examinership this year as changes to the law make it easier for small firms to apply for examinership and so keep on trading.

For now, though, liquidations continue to dominate, accounting for 80pc of total insolvencies in January.

There were only 19 receiverships during the month, down 58pc year on year.

The January data compares favourably with 2012, when insolvency levels rose 3pc overall. Despite the topline growth, insolvencies in the hospitality, retail and construction sectors fell back during the year, while examinership became ever more popular, with cases rising by two thirds.

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