PwC Restructuring Update—Q4 2023

32%

annual increase in insolvencies in 2023 compared to 2022.
44%

quarterly increase in Q4 2023 compared to Q3 2023.
€1.79bn

of tax debt warehoused by 58,152 businesses.
17

times more liquidations than SCARPs.

A look back at 2023 and what to expect in 2024

Finalised insolvency levels rose by one-third (32%) in 2023 compared to 2022, with 717 companies entering insolvency compared to 545 in 2022. In addition, there was a near doubling of insolvencies in 2023 compared to 2021, when there were 379 insolvencies—an increase of 89%.

Q4 of 2023 had the highest quarter of insolvencies since the pandemic with 229 companies entering some form of insolvency. Q4 2023 insolvencies were also 44% higher than Q3 2023 and 19% higher than Q4 2022.

PwC expects further increases in the business failure rate in 2024, with overall insolvency levels projected to reach close to 1,000—being closer to the average 19 year insolvency rate per year.

Business failures on the rise, but still below pre-pandemic levels

PwC’s latest Insolvency Barometer further reveals that business failures, though remaining below 2019 levels, are beginning to revert to pre-pandemic levels. For example, there was a significant increase in the insolvency rate in 2023—reaching 27 per 10,000 companies compared to 36 per 10,000 in 2019—but still well below the peak of 109 per 10,000 businesses in 2012.

Over the past 19 years, the average number of insolvencies per year is just over 1,000 per year. Ireland’s current insolvency rate per 10,000 companies is running at 25% of the 2012 peak.

Retail, Hospitality and Construction made up over half of all 2023 insolvencies—pressure will increase in 2024

Retail, hospitality and construction are the most impacted sectors. The retail sector had the highest number of business failures in 2023 with 144, an increase of 50% from 2022. Hospitality was the next highest with 127 business failures in 2023, up 53% from 2022. With 97 business failures, construction was the third most impacted sector in 2023. Together, retail, hospitality and construction alone made up over half (51%) of all insolvencies in 2023.

There will be increased pressures on the retail, hospitality and construction sectors in 2024. In addition to accounting for over half of all insolvencies during 2023, these three sectors also make up just over half of the Revenue warehoused debt with circa €920 million outstanding.

SCARP and Examinership still under-utilised, but usage likely to increase in 2024

There were only 33 SCARP appointments in 2023, representing just 5% of the total insolvencies. Examinerships were even lower again at 18, making up less than 3% of all insolvencies. By comparison, there were 17 times more liquidations than SCARPs during 2023. However, there is expected to be an increase in the number of SCARP and examinerships in 2024, albeit from very low levels.

UK has a record level of insolvencies

With their numbers due to be published shortly, the UK is expected to have had the highest number of insolvencies in 2023 since 2009, whilst its equivalent liquidation rate per 10,000 companies remains double that of Ireland.

Lenders still remain relatively patient in terms of enforcement and receivership levels

There has been a small increase in the number of lender initiated receiverships in 2023, but they still remain relatively low at just 105—an increase from 83 in 2022. Lender patience will be tested in 2024 as debt levels and interest rates continue to bite.

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.