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Service sector insolvencies in 2016 post 65% increase on 2015

Written by Robert McHugh, on 12th Jan 2017. Posted in Economy

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The total number of corporate Irish insolvencies recorded in 2016 was 1,032 according to the latest insolvency statistics published by www.insolvencyjournal.ie.
This represents a 2% decrease on 2015 (1,049) and is further evidence that the economy is improving. 
An analysis of the figures by industry sectors reveals some striking differences. On the positive side the retail industry posted a 38% drop in insolvencies, down from 154 in 2015 to 96 in 2016, largely due to a more benign environment on the high street.  
However, the figures show not all sectors were able to reduce their insolvencies. The service sector, in particular, recorded the most corporate insolvencies this year, with 329, up by a massive 65% from last year’s figure of 200 insolvencies. This rise in company failures in the services sector, at first glance appears odd, but for insolvency experts it is not surprising.  
Partner in Deloitte Restructuring Services, David Van Dessel says, "While this increase in the service sector failures may seem counter-intuitive it often occurs as the economy emerges from a recession. Many companies have spent so long in survival mode that when new orders do start to finally come through they often rush to take advantage and can end up over-trading and running out of cash. This problem is compounded by the difficulty companies can still face accessing financing & loan facilities and, as can be seen from Insolvency Journal’s statistics, this can be fatal.”
Of these 1,032 corporate insolvencies, Creditors’ Voluntary Liquidations (CVL) accounted for the majority with 626 recorded in the period (61%).  This is down 14% from the same period last year when 729 CVLs were recorded.  Receiverships accounted for 346 (34%) of the total corporate insolvencies in 2016, up by 38% from 251 in 2015. 
There were 45 court liquidator appointments in the year, down 5 from 50 in 2015. In 22 of these cases, the Revenue Commissioners brought the petition to wind-up.  
Examinerships continue to remain at disappointingly low levels and in 2016 just 15 examiners were appointed, representing 1% of insolvency appointments in the period.  This level of examinership take-up is consistent with the comparable periods and shows that the introduction of the new legislation in early 2014 has not had the intended effect of encouraging more struggling SMEs to avail of this more cost-effective and accessible option.  
Geographically, the highest number of corporate insolvencies in the period was recorded in Leinster with 66% (687) of the total appointments.  This is consistent with 2015 (686 appointments).  Munster had 22% of appointments, up from 21% the previous year, while Connaught was consistent with last year at 9%.  Finally, Ulster with just 3% of insolvencies, was down from 5% in 2015.
Source: www.businessworld.ie

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