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Greater number of corporate insolvencies in January 2012 compared to same period last year
01 February 2012
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It looks like the further pain inflicted on already cash strapped Irish customers as a result of the budget at the end of 2011 has resulted in an on-going lack of confidence which is in turn having a knock on effect on 2012 corporate insolvency figures. New figures released today by InsolvencyJournal.ie show that over 4 companies went out of business per day during January 2012. The overall figure of 135 is up by 39% on the the same period last year.
• The services industry was worst affected accounting for 32% of the overall total
• 33% increase for Receiverships from December 2011
• Regionally the worst hit area was Leinster, accounting for 66% of the overall total
With regard to industry totals, construction continues to be severely affected with 35 corporate insolvencies or 26% of the overall total. However this is a decrease on December which saw 31% of the total insolvencies in the construction sector. The service industry was the worst affected in January accounting for 33% of the overall total, which is an increase of 61% from December’s total. A portion of service insolvencies can be linked directly to the construction sector being so badly hit.
The manufacturing industry also saw a rise of 80% of the industry totals from December to January. The hospitality industry has remained relatively stable with 10% of the insolvencies in January. The same cannot be said for the retail industry which saw an increase of 66% from December 2011 totals.
Commenting on the figures Ken Fennell, Partner with Kavanaghfennell the firm who compile the data said, “The overall increase in total when compared to the same period last year is not surprising given the continued weak consumer sentiment as a result of the harsh budgetary measures introduced in the latter half of last year. We predict there will be a fall-off in the rate of construction insolvencies to be offset by a rise in other sectors, in particular the retail and hospitality sectors’’.
Creditors’ Voluntary Liquidations accounted for 60% of all insolvencies for January while Examinerships accounted for 5% of the overall total. In addition, January saw 7 petitions to the courts, which included Kate’s Cottage Limited and Mattog Limited. This may indicate that the Revenue Commissioner is taking a harsher stance on non-tax compliant companies.
Fennell further commented ‘’During 2012 we would expect that examinerships will increase as trading companies struggle under on-going pressure, and larger distressed companies may attract interest from foreign investors with capital. We predicted last year that there would be a significant increase in receiverships, which in January have accounted for 33% of the overall totals. Some notable Receiverships include Aran Link Limited, Maplewood Limited and Deane Homes Limited’’.
Perhaps the most interesting news in January was the announcement of the new Personal Insolvency Bill. This Bill follows a requirement laid down by the EU and IMF as part of the bailout package. Going forward this bill will change personal insolvency in Ireland and will begin to deal with the issue of unsustainable personal debt. The new Personal Insolvency Bill will follow the Recommendations contained in the Law Reform Commission Report of December 2010 which proposes an automatic discharge from Bankruptcy from 12 years to three, if strict conditions are met. This new legislation is planned to come into effect in March 2012.
Commenting on the outlook for 2012 Ken Fennell said ‘’My overall prediction for 2012 would be similar to last year’s prediction with an increase in insolvencies for the first 6 months of the year and stabilizing in the latter half’’.
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