5,300 businesses have shut their doors so far this year
There has been a dramatic increase in the number of companies ceasing to trade this year, with thousands of firms voluntarily closing even as the economy recovers from the Covid shock.
New data by credit risk analyst CRIFVision-Net shows a 48pc annual increase in firms lodging “ceased trading” notices in the third quarter, when most business sectors were fully reopening.
So far this year 5,300 businesses have opted to shut their doors rather than carry on. About 60pc of those closures – 3,015 companies, mostly SMEs – occurred between May and September.
During the same period in 2020, which includes the tail end of the first lockdown, there were 2,096 ceased-trading notices published for Irish companies.
CRIFVision-Net’s data for this type of winding-up process only goes back to May 2020 when the company began recording during the pandemic. A notable rise in voluntary closures turned up when they were capturing insolvency data.
The figures suggest many business owners do not see a profitable future for their enterprises even at a time of strong growth and consumer spending.
Companies going down this route are not doing so because they are in financial trouble, as firms cannot use the voluntary strike-off process if they have outstanding debts.
“A large number of companies closing would not be in this position to use this process as they may have outstanding creditors or debts and could be subject to winding up, examinership, receivership or involuntary strike off,” said Christine Cullen, managing director of CRIFVision-Net.
“Typically, this is a less expensive way to remove a company from the register rather than, for example, going down the insolvency route, which can be very expensive.”
Insolvencies are decreasing among Irish companies, as well, the data shows, with a 24pc annual drop in the number winding up or restructuring due to financial obligations they can’t meet.
The battered hotel and restaurant sector outperformed the average with a 76pc decrease in the third quarter. The construction sector had a more modest decrease in financial distress with a 13pc drop in insolvencies.
Nonetheless, hotels and restaurants were the most “at risk” sector, with more than three in five companies being categorised as “high risk” for creditors, according to CRIFVision-Net.
While the pandemic has been a major factor in that sector’s creditworthiness, five years ago the figures were much the same.
“The hospitality and construction sectors continue to try to navigate their way out of the short- and long-term impacts of Covid restrictions,” said Ms Cullen.
“While a year-on-year decrease in insolvencies across the two sectors is at face value certainly encouraging, possibly more telling again is the high number of businesses in these sectors currently classified as high-risk.”