Restructuring update — Q1 2022

Restructuring wave still yet to hit

While many businesses have survived the COVID-19 pandemic, they are now emerging with challenged balance sheets. Irish businesses are facing a number of challenges. These include the expiry of the Employment Wage Subsidy Scheme (EWSS); high inflation; increasing interest rates; and higher energy costs. As the Government's COVID-19 supports are gradually reduced and debt recovery gathers pace, we expect a greater level of restructuring in the coming quarters and years.

Q1 business failure insights

The business failure rate per 10,000 companies decreased by 12% from Q4 2021 (4.2) to Q1 2022 (3.7). However, there was a 19% increase in business failures during Q1 2022 (3.7 per 10,000 companies) when compared to the same period in 2021 (3.1 per 10,000 companies).

Q1 industry and county insights

During Q1 2022, the real estate sector had the largest quarterly increase in failures per 10,000 companies, rising from 6 to 20.

Dublin recorded the highest annual business failure rate of 24 per 10,000 companies.

A line graph depicting how the business failure rate per 10,000 companies decreased by 12%.

Ireland's liquidation rate versus the UK

In Q4 2021, England and Wales had the highest number of liquidations (over 4,000), since records began in the 1960s. The UK currently has triple the number of liquidations per 10,000 than the equivalent rate in Ireland.

A line graph depicting how, in Q4 2021, England and Wales had the highest quarterly total of liquidations since records began.

iTRAXX Crossover Index

The iTRAXX Crossover index is a reliable and commonly-used measure of volatility in global financial markets.

The index increased as a result of the war in Ukraine at the end of February 2022. The index has been fluctuating at a high level since early 2022 and peaked at 419 in early March.

A line graph depicting how the index increased as a result of the war in Ukraine at the end of February 2022.

Four key actions businesses can take now

1. 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.

2. 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.

3. Monitor your cash flow

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

4. 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.

We are here to help you

The months and years ahead will undoubtedly be challenging for many Irish businesses. We are ready to help you. Contact us today.

Contact us

Ken Tyrrell

Partner, PwC Ireland (Republic of)

Declan McDonald

Partner, PwC Ireland (Republic of)

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