Overview: sharp rise in insolvencies
The PwC Insolvency Barometer shows a 25% increase in insolvencies in the first six months of 2024, when 416 were recorded. This compares with 331 recorded in H1 2023.
It further shows insolvencies dropped by over 15% in Q2 2024 (188) compared with Q1 2024 (223). At the same time, Q2 2024 saw a near 10% increase compared with Q2 of 2023, when 171 insolvencies were recorded.
The current annual insolvency rate is 29 per 10,000 businesses – it has remained steady during 2024. That rate has doubled since 2021 when it was 14 per 10,000 businesses, although it still remains far below the previous peak of 109 per 10,000 businesses back in 2012.
As noted above, insolvencies were up 25% in the first half of this year compared with the first half of last year. If that rate of increase continues for the rest of 2024, the total number of insolvencies is on track to exceed pre-pandemic insolvency levels of 850 in 2019. In fact, it would be approaching 1,000 by the end of this year.
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.
Slight uptick in companies availing of SCARP rescue process compared to last quarter
Remaining at low levels, rescue processes made up 6% of insolvencies in Q2 2024, up from 3% in the previous quarter. This comprised 3 Examinerships and 9 SCARPs in Q2 2024, compared with only 2 and 5 respectively in Q1 2024.
By comparison, there were 2 Examinerships and 10 SCARPs 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 end of the Revenue debt warehousing scheme.
Retail, hospitality and construction account for over half of all insolvencies, but retail most adversely affected
Retail recorded 40 insolvencies, hospitality recorded 32 and construction recorded 28 in Q2. Together, they accounted for 53% of all insolvencies for the quarter.
Hospitality had almost 2.5 times the insolvency rate than the other sectors at 17 per 10,000 businesses. Retail had 7 per 10,000 businesses, while construction insolvencies had 6 per 10,000 businesses. Although construction and retail are experiencing similar numbers of insolvencies, the hospitality sector is still the most adversely affected.
The cessation of Revenue’s Debt Warehousing Scheme in May has not yet led to any material increase in insolvencies
The latest Revenue figures show over 93% of the €3.2 billion of debt included in the Scheme has been discharged, secured through Phased Payment Arrangements (PPAs) or is likely to be secured through PPAs.
Over 7,000 businesses did not engage meaningfully with Revenue ahead of the May 2024 deadline. Their warehoused debt, estimated at around €100m in total, is 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. They will either need to reach some agreement with Revenue or require some form of formal restructuring.
Eight times more insolvencies in Dublin than the next county
Over half (53%) of all insolvencies in Q2 2024 were registered in Dublin, where 100 insolvencies were recorded.
Five ways to optimise your company’s cash culture
1. Make cash everyone’s business
Cash is bigger than the treasury and finance departments. They both have a key coordinating role in effectively managing cash, but it’s the operations of the business that make daily decisions that impact cash. Push cash up everyone’s agenda.
2. Cash can mean different things to different people, so make cash relevant to everyone
Having a common cash language across the organisation (operations and finance) is vital to instilling a proactive cash-conscious culture that produces:
reliable cash forecasting;
effective expenditure management and tactical actions;
cash reporting and incentivisation, tailored to audiences across the organisation;
management of cash tax and government incentives;
centralised management of true cash availability and foreign currency cash; and
effective management of banking and other financing facilities.
3. Forecast cash and conduct appropriately granular scenario planning
This should involve operations and finance teams, as they are essential in reflecting and understanding the real operational risks in the current volatile market.
4. Understand and share your minimum cash thresholds
This will help colleagues in the wider business manage their daily decisions and cash commitments (once the decision is made, the cash is committed).
5. Optimise supplier and customer working capital terms and relationships
This will help conserve and generate the cheapest form of cash available to you.
We are here to help you
The months and years ahead will be challenging for many Irish businesses, but we are ready to help you. Contact us today.
PwC Restructuring Update—H1 2024
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