At least 4,500 Irish companies or 50 firms per week were saved from insolvency by government supports over the past two years, according to analysis from PwC.

The professional services giant examined 18,000 business failures across 17 years to measure the correlation between key economic indicators and the rate of insolvency.

In a first-of-its-kind analysis for Ireland, PwC used data analytics and statistical software to model the number of companies that would have failed during the pandemic had it not been for emergency supports such as the Employment Wage Subsidy Scheme (EWSS) and the Covid-19 Restrictions Support Scheme (CRSS).

"Based on the relatively low rates of business failures in the retail and hospitality sectors during the pandemic, it is clear that many of the 4,500 companies are in these sectors," Ken Tyrrell, business recovery partner at PwC Ireland, said.

"While they have not gone bust, many are on life support and will need additional support to repair their balance sheets as the service economy fully reopens."

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The arts & entertainment sector was the worst impacted sector by far at a rate of 85 insolvencies per 10,000 companies, followed by travel & transport (47) and health (36), but retail (eight), construction (15) and hospitality (16) had a lower rate than expected, indicating the effect of targeted government supports.

The least affected sectors were information & communication and professional, scientific & technical, highlighting the strong performance of foreign direct investment companies and the ease with which workers were able to transition to working from home.

Overall, the insolvency rate (liquidations and receiverships) was 14 per 10,000 companies, down 87% from its 2012 peak.

The Irish liquidation rate in 2021 was 11 per 10,000 companies, compared to 26 per 10,000 in the UK, where insolvencies have typically been 35% higher over the past 17 years. Kilkenny has the highest number of insolvencies, with 25 per 10,000 firms, ahead of Dublin (24) and Cork (12).

PwC pointed out that the liquidation rate on the island of Ireland was converging, with Northern Ireland (14 per 10,000) trending more so towards the Republic than Scotland (32) and England & Wales (32).

The company also estimates that there is currently a debt overhand of at least €10bn comprising warehoused Revenue debt, loans in forbearance, supplier debt, landlords, rate and general utilities, necessitating further state support.

"This is likely to mean that further support will be required for certain sectors and many of the 4,500 companies identified earlier -- which have effectively been on life support -- will recover while the economy fully reopens but some will need to proactively repair their balance sheets," Tyrrell said.

"Many of these companies will need to restructure their debts and will likely look to formal processes such as the Government’s recently launched SME restructuring Small Company Administrative Rescue Process (SCARP) process and traditional processes such as examinership. We expect to see a step-up in restructuring throughout the course of 2022."

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