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Over 16% increase in company failures over the last two years
03 January 2012
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Construction, Retail and Hospitality sectors hardest hit
• Construction accounts for 26% of total corporate insolvencies
• Retail insolvencies up 29% since 2010
• Hospitality sector insolvencies up 5% on 2010
Concern over the stability of the euro currency and high unemployment have severely affected consumer sentiment across the domestic sector and impacted on the continued growth rate of corporate insolvencies in Ireland. New statistics released by InsolvencyJournal.ie reveal that corporate insolvencies for 2011 have totalled 1,638. This total shows a 7% increase on the figure of 1,525 for 2010 and over 16% increase on 2009 figures. Geographically Leinster accounted for over 63% of all insolvencies, with Munster accounting for 21%, Connaught 11% and Ulster just 5%.
Commenting on the figures Ken Fennell, Partner with kavanaghfennell the firm who compile the data said “2011 proved to be another very challenging year for Irish businesses as total corporate insolvencies continued to rise and were very much in line with our predictions at the start of the year”
Corporate receivership totals for 2011 were 284, an increase of over 26% compared to 225 in 2010. Statutory appointed receivers by Nama accounted for 37 of the total 284 appointments. Some high profile Nama appointed receivers for 2011 included; Whelan’s Quarries and Bowen Construction, Nama also moved in on developers such as Sean Dunne, Grehan Brothers, Paddy Kelly and Derek Quinlan during the year. “During 2011 Nama showed they are prepared to move against borrowers when they believe it will result in more beneficial recoveries for the tax payer” Fennell commented.
Once again Construction was the hardest hit sector accounting for 26% of total insolvencies. However there was a slight improvement in year on year figures, with a 11% decrease from 472 insolvencies in 2010 to 421 in 2011. A welcome improvement considering construction has suffered the worst hit since the recession began in 2008. Some of the more high profile cases in the construction industry during 2011 were Flemings, M&J Wallace, Bowen and P Elliott.
The Retail industry accounted for 228 of the total insolvencies up 29% from 2010 total of 177; however these figures only include corporate insolvencies and do not take account of sole traders or partnership failures, of which there are no official statistics available. Fennell believes the numbers of retail failures are considerably higher than the 228 reported cases. This comes as no surprise given business failures knock on effect of unemployment leading to less trade and spending.
The Hospitality sector also continued to suffer in 2011. The total number of hospitality insolvencies reached 204 a 5% increase on the 2010 figure of 194. Some of the hotels that went bust include; Shannon Oaks Hotel, West County Hotel, Shandon Hotel and more recently the renowned Ashford Castle Hotel in Kong, Co. Mayo.
Fennell further commented “2012 will no doubt be another very difficult year for both hospitality and retail sectors. Recent budget changes to vat rates and the failure of Government to deal with upward only rent reviews will have a significant impact on both these sectors”
The low number of examinerships continued during 2011 and equalled the total of 16 for 2010. During the year there were examinership failures for McInerneys and Binman Group which both had receivers appointed. The Xtra-Vision examinership was successful with the group agreeing variations of their lease agreements. Changes to Government legislation to reduce cost of examinerships could open the process to small companies.
The number of liquidations during 2011 totalled 1,338; this includes both Creditors Voluntary Liquidations and Court Liquidations. Gym chain Total Fitness was placed into liquidation earlier in the year and all their gyms remain closed. Other liquidations included Foster Motor Company, Goff Developments and the recent liquidation of Murrays Rent A Car, which also had receivers appointed by two of its banks.
Perhaps one of the most outstanding insolvency events of the year was the application by Sean Quinn to a court in Belfast to be declared bankrupt, this case is currently being challenged by IBRC, formerly Anglo Irish Bank and a decision is expected in the New Year.
Commenting on the outlook for 2012 Ken Fennell said “2012 will again be a very difficult year for Irish businesses and particularly the retail and hospitality sectors which I believe will see a significant number of failures", he also believes the total insolvencies for 2012 will be slightly above 2011 figures.
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