Insolvencies: Reversal of previous upward trend results in lower than expected insolvencies for 2024

PwC’s latest Insolvency Barometer, analysing 2024 insolvencies, published today reveals significantly lower insolvencies than expected in the last quarter (Q4) of 2024 and for the entire year of 2024.  There were 852 insolvencies in 2024, although 16% higher than 734 insolvencies in 2023, and is significantly lower than the 900+ insolvencies expected for 2024. 

The lower than expected insolvency numbers recorded in the final quarter of 2024 when compared to the same quarter in 2023 reversed the upward trend observed in previous quarters.  For example, at the end of Q3 2024 insolvency numbers were 34% higher (659) compared to the same period in 2023 (491). On the other hand, Q4 2024 insolvency numbers (193) were 21% lower when compared to Q4 of 2023 (243). This ceased the recent trend whereby all prior quarters (i.e. Q1, Q2 and Q3) in 2024 had shown significant increases over the same quarters in 2023.  This highlights that the Irish economy and many Irish businesses continue to demonstrate resilience. 

Insolvency rate per 10,000 businesses still remains below 20 year average

At the same time, the overall insolvency rate per 10,000 businesses has doubled since 2021 but remains below the 20 year average.  The PwC Insolvency Barometer shows that the annual insolvency rate in 2024 was 29 per 10,000 businesses. Although the current rate is more than double the annual rate of 14 per 10,000 recorded in 2021, it still remains below the 20 year average of 50 per 10,000 businesses, and far below the previous peak of 109 per 10,000 businesses recorded in 2012. If we were to see insolvency levels at the 20 year average, the number of insolvencies would be closer to 1,500 rather than the 852 recorded in 2024.

Average lifespan of companies declaring insolvency is 13 years

For the first time, our analysis reveals the average lifespan of companies declaring insolvency. The average lifespan of the 852 companies declaring insolvency in 2024 was 13 years, with the shortest being 10 months and longest being almost 60 years.

SCARP utilisation remains relatively low

The number of SCARPs initiated in 2024 was just 30, compared to 33 in 2023. Approximately only 1 in every 20 insolvent companies are opting for a rescue process such as SCARP or examinership. The underutilisation of this relatively new rescue process suggests that most insolvent companies have fundamental profitability issues and are opting for liquidation rather than a rescue process.

The UK experienced a recent decline in insolvencies

UK insolvencies in October 2024 were 10% lower than that of September 2024, and 24% lower than the same month in 2023, showing the decreasing trend of insolvencies in the UK.  

Significant decrease in receiverships appointments

Receivership appointments in 2024 fell by 13% compared to 2023, with 98 recorded in 2024. Lenders are continuing to show a lot of patience in line with the past few years.

Retail accounts for almost one in every four insolvencies as hospitality remains steady

Retail recorded the highest number of insolvencies of any sector in 2024, accounting for 200 of the 852 insolvencies or 24%, equating to a rate of 32 per 10,000 businesses.

Hospitality insolvency numbers remain steady, but the sector is still one of the most challenged industries.  Hospitality recorded 150 insolvencies for the year or 18% of total 2024 insolvencies, representing 77 per 10,000 businesses, one of the highest of any sector.

Dublin records over half of 2024 casualties

In terms of counties, Dublin continues to have the highest insolvency rate of 48 per 10,000 businesses. The county recorded 440 insolvencies in 2024, including 103 insolvencies in retail, 71 in hospitality and 51 in construction.

Outlook for 2025

A robust economy, with almost full employment, cautious but steady consumer sentiment and strong fiscal returns could mean a continuation of this reversal of insolvencies towards a positive direction. However, with potential international macro-economic and geopolitical headwinds hitting our small open economy, the future is uncertain.  Businesses will also need to deal with a higher cost base in 2025 stemming from an increased minimum wage, energy costs, continued but lower inflation and auto-enrolment. However, Irish businesses are demonstrating resilience, with a focus on transforming their operations to be fit for the future.

As always, we expect there will be a strong focus on cash flow and working capital during the early months of the year for small businesses. In particular, retail and hospitality businesses will be encountering a quieter and more challenging trading period after a busy end to 2024 and will be working to adjust their cost base accordingly. 

Ken Tyrrell,  Business Recovery Partner, PwC Ireland, said: “It is good news for the economy and for businesses that the previous upward trend on insolvencies has reversed. The lower than expected insolvencies in Q4 of 2024 may be due to an economy that is performing well, easing inflation, cautious but steady consumer sentiment, a positive sentiment following Budget 2025 and strong fiscal receipts.  But nothing is certain, as businesses will need to deal with a higher cost base in 2025 alongside Ireland’s economic outlook being partially clouded by potential international macro-economic and geo-political headwinds. Businesses need to focus on their core operations, engage with their people, embed AI and GenAI and manage working capital to ensure they are sustainable into the future

“The Irish economy and many Irish businesses continue to demonstrate resilience. We will be closely monitoring the insolvency levels during Q1 to see if this change of direction continues or whether the trend of steadily increasing insolvencies since 2021 will continue in the early part of 2025. Typically at this time of year, there is a natural seasonal increase in insolvency levels during Q1 as business owners assess their trading from the previous year, build forecasts for the year ahead and make fundamental decisions based on their outlook for the coming year.”