Number of companies going out of business 'has peaked'
Four firms a day went bust last year with the construction sector hardest hit
MORE than four companies a day went out of business last year, but the number of businesses going under may have peaked, according to an accountancy firm that specialises in insolvencies.
The figures show that 1,525 Irish businesses were declared insolvent last year as hundreds of construction companies were joined by household retail names on the list of liquidations.
Insolvencyjournal.ie -- a website run by KavanaghFennell accountants that tracks company failures -- said that the number of insolvencies in 2010 rose by 8pc to just over 1,500 as the recession continued to hit Irish business hard.
Company partner Ken Fennell said that while 2011 will be tough, the overall number of insolvencies has probably peaked and he does not expect total company failures in 2011 to be above last year's figure.
"This year will again be a very difficult one for Irish businesses and particularly the retail and hospitality sectors will see a large number of failures. However, business failures are not expected to be on the same scale as last year," he said.
As expected, the construction sector was pummelled during the year as the fallout from the failure of major players such as Pierce Contracting and McInerney Group reverberated around the industry. Some 472 construction-related companies, or 30pc of the overall number, went bust last year.
The services sector was the next hardest hit with a total of 279 insolvencies, the majority of which were connected to the construction industry. Retail also suffered with 177 insolvencies.
Mr Fennell said: "2010 saw no let-up in the number of businesses becoming insolvent, although the increase on the 2009 figure is not as bad as some had predicted."
The figures show a big increase in the number of receivers being appointed with the banks appointing 225 receivers during 2010 -- nearly double 2009's figure of 124.
Mr Fennell believes this trend will continue during 2011 as the banks and NAMA try to recover what they can from failing companies.
NAMA began to appoint receivers towards the end of the year and this is expected to be a common practice over the next number of years.
Meanwhile, more than 14,000 new companies were registered in Ireland last year according to new figures from a leading business agency.
Statistics from Vision-net.ie, which acts as a database for companies filing to the Companies' Registration Office, said that 14,015 limited companies were incorporated in Ireland during 2010, an increase of 4.7pc year-on-year. That figure was almost offset by the 13,066 companies which were dissolved during the same period.
A spokesman for Vision-net could not say the same people dissolving their businesses were starting up new ones.
"There will always be people who start one business after the next, and there will always be companies that come to a natural end without being forced into closing by creditors or other parties, so while it is undoubtedly the case in some instances that companies are making deals with creditors and re-starting, it is impossible to put any figure on it," he said.
Liquidations declined by 8pc but remained over 2,000. Nearly 57pc of those companies were declared insolvent. An average of five companies closed their doors every day last year, said Vision-net managing director Christine Cullen.
Projections are largely in line with last year but "what solvency summaries don't show is the fallout that comes in the form of bad debts. Our risk indicator is showing more companies moving into the high -risk category and this is worrying", she said.