PwC Restructuring Update—Q4 2022

A look back at 2022 and what to expect in 2023.

39%

increase in business failures during 2022 compared to 2021.
€1.8bn

in debts outstanding for the 527 companies that failed in 2022.
99%

of all insolvencies in 2022 were SMEs.
57%

increase in business failures in Q4 2022 compared to Q4 2021.

In 2022, we saw a 39% increase in business failures when compared to 2021. While this is a significant increase, the pre-pandemic rate in 2019 was nearly twice as high as the 2022 rate.

Looking ahead to 2023, we expect to see a further increase in business failure rates. SMEs will face the most difficulties, with continued pressure on corporate profitability through inflation and energy costs.

2022 key insights—a year in review

The number of business failures remains at low levels despite three consecutive quarterly increases. They also remain well below pre-pandemic levels—20 per 10,000 companies in 2022 compared to 36 per 10,000 companies in 2019.

There was a year-on-year increase of 39% in the total number of corporate insolvencies from 2021 to 2022. However, 2021 was a record low year.

Economic impact

The direct economic impact from business failures in 2022 was €1.8bn. This figure represents the aggregate level of debts outstanding from businesses that failed in that year.

Quarterly update—Q4 2022

The business failure rate for Q4 2022 increased by 57% when compared to the same period in 2021.

Business failures in the UK

As highlighted in previous reports, the UK experienced a record number of liquidations in Q1 and Q2 2022 on a scale not seen since the global financial crisis. Since the publication of our last report, UK liquidations have started to plateau, although they remain extremely high.

UK liquidations have reduced from 3.0 to 2.4 times that of the equivalent Irish liquidation rate.

Q4 industry and county insights

In Q4 2022, the energy and utility sector had the highest number of business failures per 10,000 companies. This outcome was anticipated in our Q3 2022 report.

Dublin had the highest number of business failures with 42% of the total in Q4 2022, down from 54% in the previous quarter.

Key actions to take now

Assess your working capital

Companies must reappraise and shore up their liquidity and working capital requirements to address the unwinding of government support and debts accrued during the pandemic, while meeting renewed customer demand and delivering delayed investment.

Identify multiple funding sources

The limited availability of further government support will increase reliance on existing lenders, shareholders and access to the capital markets, which may be less forthcoming in sectors where the prospects for recovery and long-term growth are less clear.

Monitor your cash flow

In this uncertain and potentially stop-start pathway to recovery and economic growth, it is essential to monitor cash flow. Companies must develop realistic forecasts that take account of potential varying recovery scenarios and, in particular, increasing rates of inflation in Ireland and around the world.

Consider the future

The immediate demands don't just include day-to-day expenses, but also funding for future growth and adapting to the trends reshaping marketplaces and economies.