Almost 46,000 firms at risk of going bust
MORE than 46,000 companies in Ireland are in danger of collapsing and leaving behind a €288bn trail of bad debts, according to new research by business information group Vision-net.
The firm estimates that 38pc of the country's 122,000 actively trading companies could go bust, based on an analysis of their credit ratings, as well as accounts filed by the firms over a three-year period to 2010.
Most at risk are companies involved in the restaurant, hotel, retail and motor trade sectors.
Vision-net said the liabilities that could be transformed into bad debts comprised primarily bank loans such as mortgages and other asset lending, as well as regular trading transactions. The firm also established that the majority of the debt is unsecured, meaning creditors would have no immediate recourse to recoup the debt.
"These numbers confirm two difficulties facing the economy -- getting paid and getting a loan," said Vision-net managing director Christine Cullen.
"The monetary amounts owed are stark. Few businesses can withstand such liabilities and this, in turn, has consequences for trading levels. Crucially, it also influences bank lending decisions and undermines credit availability."
The Vision-net analysis found that 55pc of all hotels in Ireland, 44pc of construction firms, 41pc of motor companies and 41pc of all real estate firms are experiencing serious credit distress. In the manufacturing sector, 35pc of firms are at high risk and in the wholesale and retail trade, the figure is 40pc.
The Vision-net survey also coincides with calls for reform of debt and bankruptcy laws by the Law Reform Commission, the Mortgage Arrears and Personal Debt Review Group and the Financial Regulator.
Between January and November this year, the number of firms that went bust in Ireland reached nearly 1,400. That's 11pc higher than the same period in 2009, while the tally is likely to reach 1,500 by the end of this month.
"The figures are on the increase," Ms Cullen said. "Companies cannot survive without cash flow. With this level of debt tied up in struggling companies, it enhances risk of bad debt."