Services sector tops lists of insolvencies

THE construction sector accounted for one in five insolvencies in Ireland in the six months to June 30.

Overall there were 435 insolvencies in the first half of 2018, down 4pc on the same period last year, according to figures from consulting firm Deloitte.

A majority of businesses that were declared insolvent were found in the services sector, which had a total of 96 insolvencies. The construction sector had 85.

While the number of insolvencies being reported is continuing to fall, the news is not all positive.

David Van Dessel, partner at Deloitte, warned that there may be a number of ‘zombie’ companies which continue in their attempts to recover from the economic recession but do not succeed, as well as startup companies that do not prevail given the high incidence of failure in this area.

“The rate of insolvencies in Ireland has continued to fall in 2018, which is encouraging, however, it is notable that the latest rate of decline is lower than we observed in the first quarter of this year – 14pc – and the comparable period last year, where the number of insolvencies was down 11pc,” Mr Van Dessel said.

In addition, Deloitte has noticed a trend where existing companies, in their attempt to expand in improved economic conditions, have dedicated limited finance to the expansion plans, due to what Mr Van Dessel described as “a backdrop of restrictive credit lines”.

“These expansion plans may not deliver the necessary return on investment, leaving these companies exposed to a higher than normal risk of failure.”