214 corporate insolvencies have been recorded in Ireland in Q1 2024, an increase of 47% compared with Q1 2023, when 146 insolvencies were recorded. The increase, according to the latest Insolvency & Restructuring Statistics compiled and published by Deloitte Ireland, has been primarily driven by Creditors’ Voluntary Liquidations (CVLs), which saw a 71% increase from the same period last year.
There have been five SCARP (Small Company Administrative Rescue Process) appointments and two Examinerships in Q1 2024 which shows a downward trend in the level of companies seeking early help. Since its introduction in 2021, there have been 60 SCARP appointments in total with a 73% success rate, saving 761 jobs.
CVLs continue to account for the majority of insolvencies with 171 (80% of total) recorded in Q1 2024. This is a 71% increased on the same period last year. Court liquidations and SCARP & Examinership account for 3% each of total insolvencies (seven each). Compared with Q1 2023, Court Liquidations have remained the same, while SCARP & Examinership accounted for 15 this time last year. 29 Corporate Receiverships were recorded in Q1 2024 (14% of total insolvencies).
REGIONAL FOCUS
173 corporate insolvencies were recorded in Leinster in Q1 2024, making up 81% of insolvencies, up slightly from 78% in the same period of 2023. Munster saw 21 insolvencies (10% of total), Connaught 19 (9% of total) and there was only one insolvency in Ulster (Republic of Ireland only).
Debt warehousing and 0% interest rate.
The latest reported Revenue statistics on warehoused debt at the end of January 2024 indicated that €1.72 billion of warehoused debt is owed by over 58,000 businesses; and almost 70% of these businesses owe warehoused debt of less than €5,000.
Businesses have until 1 May 2024, less than five weeks away, to either pay their warehoused debt in full or agree a Phased Payment Arrangement (PPA). If there is no agreed PPA in place, the entire warehoused debt is due and owing on 1 May 2024.
A key component of a PPA is that it will likely include a minimum down payment of up 40% of the warehoused liability and agreement of same may impact tax clearances.
SECTOR FOCUS
Hospitality saw a 142% increase in insolvencies in Q1 2024 from Q1 2023 with an increase of 27 businesses becoming insolvent since this time last year. This also represents a 44% increase from Q4 2023. 35 of the 46 insolvencies in the hospitality sector related to restaurants and cafes. This significant increase in the hospitality sector is likely due to increased labour and energy costs, as well as an increase in the VAT rate to 13.5% and insurance costs.
In addition, the mandatory Pension Scheme will come into operation in September of this year. These factors, together with the overall higher cost of living impacting discretionary spend, is likely to see continued distress in the hospitality industry for the remainder of 2024.
INCREASED COSTS
Commenting on the latest statistics, James Anderson, Turnaround & Restructuring Partner at Deloitte Ireland said: “These statistics show there is an increased rate of impairment within businesses and as a consequence we are seeing a material uptake in insolvencies. We forecast that there will be in the region of 800 insolvencies in 2024, this is an increase of 200 on our 2023 forecast – where the actual number was 663. 800 would represent the highest number of insolvencies since 2017 (874) and a return to the pre-pandemic insolvency activity level. However, increased labour, insurance and energy costs will continue to be a challenge for businesses”.
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