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Many small firms say they can’t face yet another crisis after Covid and will close

Neil McDonnell, head of the Irish SME Association, says business owners are saying: ‘I just can’t do this again. I’m just going to cut and run’

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Isme's Neil McDonnell. Photograph: Gareth Chaney

Isme's Neil McDonnell. Photograph: Gareth Chaney

Isme's Neil McDonnell. Photograph: Gareth Chaney

Having been through the financial crisis and Covid, business owners – especially those in their mid-50s – are getting ready to “cut and run” as inflation surges and another slowdown looms.

Small and medium-sized enterprise (SME) insolvencies were up 58pc in the three months to June, compared to the first three months of the year, according to consultants PwC, but that followed a record lull during the pandemic, when firms availed of ample state support.

“I think that what people aren’t prepared to do, which they were prepared to do before [the pandemic], is flog a dead horse and just keep at it,” said Neil McDonnell, head of the Irish SME Association.

“I think you will see a lot of businesses calling time.

"I get it on a personal level, from people who were in their early to mid-50s in the great recession, and they are at it again now 10 years later, and they say, ‘I just can’t do this again. I’m just going to cut and run and dispose of the assets and take what’s left because I’m too old to be doing this stuff again.’”

Mr McDonnell said small firm insolvencies will “hopefully come under 5,000” and preferably stay “in the low thousands”.

Most experts say Ireland will escape the “tsunami” of failures seen after the 2008 financial crash, when 2,000 firms a year were going bust at its peak.

But the end of wage supports in April and the resumption of ‘parked’ tax repayments next January will send numbers ticking upwards.

PwC estimates Government supports have saved at least 4,500 companies from going bust in the last two years, and says Irish SMEs are carrying around €10bn in debt.

A new low-cost, fast-track insolvency regime - the Small Company Administrative Rescue Process (SCARP) - came into force late last year for firms with no more than 50 staff and maximum turnover of €12m.

Andrew Dolliver, a strategy and transactions partner at consulting firm EY, said SCARP might offer banks and other creditors a better chance of recouping their cash.

“In this situation, there are probably going to be a lot more trading businesses. Appointing a receiver over a business may well lead to the business deteriorating and certainly any sort of liquidation, you may be looking at less return.

"The other options - examinership and SCARP and other sort of debt reprofiling - are things that all of the lenders will be more open to looking at.”

Firms in the retail and hospitality, particularly restaurants, could be most squeezed.

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Retail sales fell 6.6pc year on year in June, although spending in bars was up more than 50pc on 2021.

“With hospitality, I’m always amazed that, in Ireland, people just love to go out, but particularly with restaurants, people might be cutting back,” Mr Dolliver said.

Meanwhile, business incorporation agency Company Bureau is warning firms they are in danger of being struck off by the Companies Registration Office (CRO) – or fined – if they fail to file annual returns after a Covid amnesty.

“There is a little bit of an enforcement drive at the CRO,” said bureau commercial director Andrew Lambe.

"You’ve got two-and-a-half years’ worth of companies that probably should have been struck off but are still on the register.”


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