The Revenue Debt warehouse scheme deadline passed during May 2024 and has not yet resulted in a material increase in insolvencies.
Insolvencies among Irish businesses are 25% higher for the first half of 2024 when compared to the same period last year, according to PwC’s latest Insolvency Barometer.
Some 416 insolvencies were recorded by the barometer in H1 2024 compared with 331 recorded in H1 2023.
“In an environment with a growing economy, robust fiscal returns, almost full employment and falling inflation, the overall insolvency level remains relatively low and well below the long term average”
PwC’s latest Insolvency Barometer further shows that the number of insolvencies dropped by just over 15% in quarter two (Q2) of 2024 (188) compared to quarter one (Q1) of 2024 (223). However, Q2 2024 saw a near 10% increase compared to Q2 of 2023, with 171 insolvencies in that quarter.
PwC’s latest Insolvency Barometer further shows that the number of insolvencies dropped by just over 15% in quarter two (Q2) of 2024 (188) compared to quarter one (Q1) of 2024 (223). However, Q2 2024 saw a near 10% increase compared to Q2 of 2023, with 171 insolvencies in that quarter.
Insolvency rate holds steady
The current annual insolvency rate is 29 per 10,000 businesses and has remained steady during 2024.
The current annual insolvency rate has doubled since 2021 when the rate was 14 per 10,000 businesses, although it still remains far below the previous peak of 109 per 10,000 businesses back in 2012.
With insolvencies up 25% in the first half of this year compared to the first half of last year, if that rate of increase continues for the remainder of 2024, the total number of insolvencies would be on track to exceed pre-pandemic insolvency levels of 850 in 2019 and will be approaching 1,000 by this year end.
End of Debt Warehousing Scheme
The Debt Warehousing Scheme has now come to an end, with the latest Revenue figures showing that over 93% of the €3.2bn of debt included in the Scheme has been either discharged, secured through Phased Payment Arrangements (PPAs) or likely to be secured through PPAs.
Over 7,000 businesses did not engage meaningfully with Revenue ahead of the May 2024 deadline, with their warehoused debt, estimated at around €100m in total, now subject to normal collection and enforcement procedures, along with interest rates of 8-10%.
Many of these businesses are in the Retail, Hospitality and Construction sectors and will either need to reach some agreement with Revenue or require some form of formal restructuring.
SME liquidations account for four out of five insolvencies
SME liquidations continue to be the most common form of insolvency, accounting for 83% of all insolvencies in Q2 2024. There were 155 liquidations in Q2 2024, which is marginally higher than the same quarter in 2023 (141). Encouragingly, however, SME liquidations in Q2 2024 were substantially (18%) lower than Q1 2024, with 189 SME liquidations.
Remaining at very low levels, rescue processes made up 6% of insolvencies in Q2 2024 up from 3% in the previous quarter. This represented three Examinerships and 9 SCARPs in Q2 2024, compared to only 3 and 5 respectively in Q1 2024. By comparison, there were 2 Examinerships and 10 SCARPs respectively recorded in Q2 2023 (7% of total insolvencies). The slight uptick of SCARPs in Q2 2024 over Q1 2024 may have been influenced by the cessation of the Revenue debt warehousing scheme.
Retail recorded 40 insolvencies, Hospitality recorded 32 and Construction recorded 28 insolvencies, accounting for 53% of all insolvencies for the quarter. However, Hospitality had almost 2.5 times the insolvency rate at 17 per 10,000 businesses, versus Retail at 7 per 10,000 businesses, while Construction insolvencies equated to 6 per 10,000 businesses. This highlights that although Construction and Retail are experiencing similar numbers of insolvencies, the Hospitality sector is still the most adversely affected of all sectors.
As per previous quarters, the UK liquidation rate continues to be higher than the equivalent Irish rate, albeit lower insolvency numbers were recorded in the UK for May 2024 versus May 2023. As was the case in the last quarter, the gap between the liquidation rate in the UK (44 per 10,000 businesses) is 50% higher than that of the equivalent rate in Ireland (29 per 10,000 businesses).
There were 21 receiverships in Q2 2024 which is broadly in line with the same quarter for 2023 (17) and Q1 2024 (27). These figures show that lenders remain very patient and are only resorting to enforcement in a very limited number of cases.
More than half of all insolvencies in Dublin
Over half (53%) of all insolvencies in Q2 2024 were registered in Dublin, recording 100 insolvencies.
“PwC’s Insolvency Barometer shows that the annual insolvency rate remains steady but signs are that it is returning to the higher pre-pandemic levels,” said Ken Tyrrell, Business Recovery Partner, PwC Ireland.
“In an environment with a growing economy, robust fiscal returns, almost full employment and falling inflation, the overall insolvency level remains relatively low and well below the long term average. However, some consumers are still concerned about their personal financial situation and remain cautious on spending.
“Some businesses also continue to feel the economic pressures, especially those in Hospitality, Retail and Construction. And while they could warehouse some debts in the past, this option is now no longer available. The cost of doing business overall remains high for many small businesses and these businesses need to continue to carefully plan their day to day cash flows,” Tyrell said.
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