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21% decrease in Irish corporate insolvencies in third quarter

Written by Robert McHugh, on 8th Nov 2019. Posted in Financial

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New figures released today by Deloitte on the latest insolvency statistics show another drop in corporate insolvencies, continuing a steady trend in recent years. In the year to date (YTD) 2019 the level of insolvencies stood at 439.

When compared with third quarter YTD 2018 (557) this represents a decrease of 21%, a marginally higher decrease than the 18% recorded on the third quarter YTD 2017 figures.

Seventy eight percent (343) of insolvent companies were incorporated more than five years ago and this suggests that the majority do not relate to ‘start-ups’, which entities are generally considered to be less than five years in business.

A little over a fifth of companies (22% or 96 companies) that became insolvent during the nine month period relate to companies less than five years old, 23% (100) are in the 5-10 years bracket, 25% (112) are in the 10-20 years bracket, 16% (72) are in the 20-30 years bracket, 7% (29) are in the 30-40 years bracket and 7% (30) are over 40 years old.

The highest number of corporate insolvencies in the third quarter 2019 YTD was recorded in Leinster with 62% (273) of total appointments, (a decrease on the comparable period in 2018 where Leinster had 68%.) Munster recorded 24% compared to 20% for the same period in the third quarter YTD 2018. Connacht remained in line with third quarter YTD 2018 levels at 9% of total insolvencies. Ulster recorded 4% of total insolvency figures. This is a marginal increase on third quarter YTD 2018 statistics when 2% of total insolvencies were recorded in Ulster. In general, the geographical spread is consistent with the prior year to date.

The services industry once again recorded the highest level of insolvencies with 168 (38%) services company insolvencies recorded. Within the services industry, as recorded in the first half of 2019, companies operating in the financial services sector have been the most affected by insolvency with 50 insolvencies recorded during the period.

Real estate service companies recorded 29 insolvencies, professional services companies recorded 16, advertising companies recorded 14, health and medical related companies recorded 8 and trade companies recorded 6. There were 45 other services companies affected by insolvencies across a broad range of sub sectors to include IT, engineering, recruitment, beauty, agricultural, security, recreational and leisure.

The construction industry recorded the second highest level of insolvencies during the period with 72 insolvency incidences (16%) noted. Insolvencies in this sector as a percentage of overall corporate failures has decreased marginally when compared to the same period last year when 100 (18%) insolvencies were recorded. 

Deloitte say the continued high level of insolvencies within the construction industry would suggest that certain companies operating within the sector are impacted by market pressures and price competitiveness, in addition to legacy issues from the 2008 financial crisis.

However, a growth and strengthening of the sector has been observed during the first half of 2019, which led to an increase in demand for commercial and residential space. Consequently, this may have contributed to the decrease in insolvencies during the first three quarters of 2019, compared to the overall number of business failures to date in 2019.

Insolvency levels in IT, motor, transport and wholesale have all remained broadly consistent with levels recorded in the same period for 2018.

Commenting on the figures, Partner at Financial Advisory at Deloitte, David Van Dessel said, "The statistics continue to suggest a significant tendency to liquidate companies in difficulty and in some cases to take the risk of attempting to trade out of insolvency. Where a company ultimately fails and enters an insolvent liquidation process, the consequences for the Directors of adopting the latter approach can be serious, including the possibility of a restriction or disqualification order, or the possible imposition of personal liability for corporate debt in certain circumstances."

He added, "Seeking advice at the first signs of difficulty and exploring all options available would significantly reduce a Director’s risk of culpability in circumstances where a business ultimately fails and enters an insolvent liquidation process."

Source: www.businessworld.ie

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