| 11.7°C Dublin

Deloitte says business insolvencies will be up a third this month compared with first nine months of 2022

Close

The companies behind chef Dylan McGrath's Rustic Stone and Brasserie Sixty6 restaurants used the Scarp scheme. Photo: Mark Condren

The companies behind chef Dylan McGrath's Rustic Stone and Brasserie Sixty6 restaurants used the Scarp scheme. Photo: Mark Condren

The companies behind chef Dylan McGrath's Rustic Stone and Brasserie Sixty6 restaurants used the Scarp scheme. Photo: Mark Condren

The companies behind chef Dylan McGrath's Rustic Stone and Brasserie Sixty6 restaurants used the Scarp scheme. Photo: Mark Condren

/

The companies behind chef Dylan McGrath's Rustic Stone and Brasserie Sixty6 restaurants used the Scarp scheme. Photo: Mark Condren

The number of companies becoming insolvent will be up a third by the end of this month compared with the first nine months of 2022, according to a forecast from accountancy giant Deloitte.

The growing scale of financial distress has already triggered a sharp rise in use of the Small Company Administrative Rescue Process (Scarp), the new examinership-style rescue scheme for companies at risk of going bust.

Recent high-profile cases of businesses using Scarp include the companies behind chef Dylan McGrath’s Rustic Stone and Brasserie Sixty6 restaurants, which both appointed Neil Hughes of accountancy group Baker Tilly as the adviser for the process that can allow businesses to trade through difficulties and emerge with reduced debts. 

In the wider economy the increasing levels of financial distress reflect rising inflation, interest rate hikes and soaring energy costs, all of which are expected to continue to add pressure to businesses.

The services sector is projected to account for the highest proportion of insolvencies.

Deloitte said the total number of corporate insolvencies forecasted in Ireland for the first three quarters of 2022 is 378. That’s almost a third higher than the 278 insolvencies recorded in the first nine months of 2021 which had included the tail end of the Covid pandemic and final shake-off of lockdowns.

Insolvency experts have long been predicting a delayed wave of Covid-linked insolvencies in late 2022, as the benefits of government supports, tax warehousing and loan repayment breaks all brought in during the lockdowns roll off. 

That is now happening, according to David Van Dessel, financial advisory partner at Deloitte.

“Based on current insolvency activity levels and trends, it now appears that the previously forecasted wave of insolvencies is becoming a reality,” he said.

Interest will begin to accrue on most of the €2.8bn of debt “warehoused” by Revenue from January 1 next, he added. 

A new factor which had not been a feature as the pandemic ended is the squeeze on household finances – which looks set to translate to reduced spending, he said.

Business Newsletter

Read the leading stories from the world of business.

This field is required

“Consumers impacted by inflation and interest rate increases may also reduce their discretionary spending, further exacerbating downward economic pressures,” Mr Van Dessel said. 

Businesses that are already struggling need to consider their options at the earliest opportunity, as early action is a key factor in successful turnarounds, he said.


Most Watched





Privacy