Irish corporate insolvencies rose 16 per cent to their highest level in six years, though they came in below expectations as the fourth-quarter saw a drop off in company collapses, according to PwC.
The Big Four accountancy firm said the total figure for 2024 was 852, which was well shy of its forecast that insolvencies would breach the 900 mark this year.
The lower figure “highlights that the Irish economy and many Irish businesses continue to demonstrate resilience”, PwC said.
The retail and hospitality sectors accounted for more than 40 per cent of all insolvencies. While the economy was strong last year – with gross national income-star (GNI*) estimated by the Government to have grown by almost 5 per cent for a second year running – and the European Central Bank (ECB) started to cut borrowing costs as inflation eased significantly, a number of businesses had failed to recover from the accumulated effects of the pandemic and soaring running costs as a result of the Ukraine war.
For some, this came to a head as the Government’s pandemic-era scheme allowing businesses to postpone the payment of certain taxes came to an end.
Liquidations accounted for almost 80 per cent of all insolvencies last year, while receiverships made up less than 15 per cent. The average lifespan of companies declaring insolvency in 2024 was 13 years, with the shortest being just 10 months and longest being almost 60 years.
Liquidations during the year included fashion retailer Alias Tom, which once put clothes on the likes of U2 and Westlife; prepaid cards company PFS Card Services; the company behind home improvement and gardening retailer Homebase in Ireland; Dublin city-centre pub Mulligans & Haines; and nearby French-style bistro the Green Hen.
Still, some insolvency practitioners have noted in recent times that there has been a big increase in companies looking for pre-insolvency advice, which is leading to a lot of restructuring happening outside of formal processes such as receivership, examinership or liquidation.
Press-Up, the largest hospitality company in the State, co-founded by Paddy McKillen jnr, saw London-based lender Cheyne Capital take control of it in September as part of a debt-for-equity swap deal. Some of the businesses were put into receivership under a consensual arrangement.
PwC noted that the utilisation of an “examinership-lite” regime, known as the small company administrative rescue process (Scarp), has remained low since it was introduced in 2021. Some 30 companies opted for this process last year, down from 33 in 2023.
Examinerships and Scarps accounted for less than 7 per cent of all formal insolvencies last year.
“Approximately only one in every 20 insolvent companies are opting for a rescue process such as Scarp or examinership. The underutilisation of the relatively new rescue process suggests that most insolvent companies have fundamental profitability issues and are opting for liquidation rather than a rescue process,” PwC said.
Looking ahead, PwC said the still-elevated cost of debt may drive a number of defaults as companies face refinancing at higher rates.
“Refinancing has overtaken mergers and acquisitions as the primary purpose of new leveraged loans. In the leveraged loan market the focus has very much been on amending and extending facilities,” it said.
PwC also said 2025 may also see some businesses wave the white flag after years of trying to deal with a series of issues. “Some management teams in challenged sectors are fatigued after the past few years of unprecedented economic conditions,” it said.
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