Friday 24 January 2020

One in three firms fails in its first five years

Study: The services sector was hit hardest over that five-year stretch, with 59,463 jobs lost as firms closed. Stock image
Study: The services sector was hit hardest over that five-year stretch, with 59,463 jobs lost as firms closed. Stock image

Shawn Pogatchnik

ONE in every three new businesses in Ireland fails within five years, according to new Central Statistics Office (CSO) research into survival rates.

The findings, contained in an analysis of Ireland's business activity in 2017, document the difficulties of sustaining a firm from birth to maturity.

The report found that of 15,080 new enterprises formed in 2012, only 9,979 remained in 2017.

It said 1,824 firms had failed within one year, 3,388 by 2014, 4,149 by 2015 and 4,945 by 2016.

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Births and deaths due to mergers, takeovers, break-ups or changes in activity were all excluded from the CSO data.

The report illustrated Ireland's rebound from the crash. There was steady growth in the establishment of new businesses from a 2013 low point of 13,824. In the same year 18,287 firms closed down. While the high failure rate of firms produced job losses, these were proportionately less steep, reflecting job growth at surviving enterprises and a high fail rate among sole traders.

For example, firms founded in 2012 employed 18,606 at the start. Five years later, 33.8pc of the firms were gone but the number of associated jobs dropped by 29.9pc to 14,151.

The CSO also took a longer-term view of positions created and lost during the years 2012 to 2016, with employment 'deaths' at all failed enterprises State-wide peaking at 22,584 jobs in 2013.

The services sector was hit hardest over the period, with 59,463 jobs lost as firms closed, followed by 21,285 distribution jobs and 16,697 construction roles.

The average number of people working at new firms has broadly grown year on year, in line with Ireland's recovery.

Since 2014, new firms have generated more new jobs than were lost at failed ones.

For example, the 19,249 firms created in 2016 employed 24,382 people, while 19,616 people lost their jobs at failed firms nationwide that year.

The CSO said it had estimated the 2016-17 firm and job loss figures because "enterprises need two years of inactivity before being declared a final death".

Irish Independent

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