Sharp fall in company insolvencies gives hope for recovery
THE number of companies going out of business during the last quarter fell sharply, giving hope that the economy may be starting to stabilise.
Latest figures from Insolvencyjournal.ie -- a website run by the accountants KavanaghFennell -- show there were 395 corporate insolvencies between July and September. That was a drop of some 13pc on the second quarter of the year, when 454 firms went bust.
Compared with the same period last year, insolvency levels were broadly unchanged, climbing by just six. In September alone, 112 companies ceased trading. That was the lowest figure for any month this year.
Despite the broadly improving data, the total number of businesses that have gone to the wall this year is still higher than 2011. Some 1,282 companies have fallen away so far, up 6pc on the same point last year.
The last three months have been marked by the increasing number of companies going into receivership rather than full liquidation. Just over 90 firms took this route, up by more than a third on the previous quarter.
According to KavanaghFennell partner Ken Fennell, the actions of the National Asset Management Agency have kept that figure high.
"Receivership totals remain high as the banks and NAMA continue to carry out enforcement action where they believe they have no alternative options to recover funds from distressed borrowers," he said.
"There is a 54pc increase in totals on the first nine months of this year when compared with 2011," he said.
Mr Fennell also welcomed the development of pre-pack receivership here. That occurs when a company goes into receivership having agreed to be sold to another firm. Clerys department store took that route.
The accountant believes that is the best hope of job preservation for a business finding itself in difficulty.
"One positive we can take from the Q2 to Q3 decline is the possibility that the volume of insolvencies may have flattened out and although we don't expect to see any significant decline in the figures the totals look to have peaked."
Construction remains by far the hardest hit sector.
Still, the rate of construction failures fell 7pc year on year, while losses in the retail sector increased 4pc, bringing the number of such firms to go under to 49. Some of the most high profile failures have been in retail. Apart from Clerys, Peats Electronics and Atlantic Homecare have all had problems, and issues in retailing are set to continue, according to the report.
Mr Fennell added that the number of firms going into examinership instead of liquidation will rise sharply as a result of changes to insolvency law.
"The large number of companies opting for voluntary liquidation is an indication of how difficult some SME's are finding the trading environment.
"Changes to legislation to reduce the cost of examinerships could open the process to small companies and help to protect an insolvent trading business with a reasonable prospect of survival."