There has been somewhat of a downward trend in insolvencies, but this doesn’t look likely to last in light of geopolitical upheaval and uncertainty, writes Sorcha Corcoran

The first quarter of 2025 recorded fewer insolvencies compared to each preceding quarter of 2024, according to a new study.

PwC’s latest Insolvency Barometer found there were 14% fewer insolvencies in the first quarter of this year compared to the same period last year.

The firm reported a total of 852 insolvencies last year, while Deloitte put the figure at 875 — both below the 900 insolvencies that had been generally expected.

However, Deloitte noted that its total represented a 32% increase on 2023 and was “the highest level recorded since 2016 when the total was 1,032”.

In January, the firm forecasted around 1,000 insolvencies for 2025. But of course, that was before US president Donald Trump started to play fast and loose with his ever-changing tariff policy, which is putting all types of predictions to the test.

Whatever happens in the next few months, insolvency and corporate restructuring will remain very much a feature in Ireland, it seems.

Paddy O’Connell, restructuring partner at RSM Ireland, says: “Insolvency levels have fluctuated in recent years, but much of this data has been distorted by the aftershocks of the Covid-19 pandemic.

“Government support schemes temporarily sustained businesses that were in reality fundamentally insolvent, delaying the inevitable for many.”

He adds: “Today, the economic environment is shifting once again. The introduction of tariffs; rising global tensions and the threat of trade wars have created an atmosphere of deep uncertainty.”

For businesses that are active internationally, this is already influencing investment decisions with many pausing or curtailing future plans.

More worryingly, O’Connell notes, there is a growing concern that US or other foreign-owned firms may opt to relocate or wind down their Irish operations altogether.

Such strategic decisions could have a ripple effect on Ireland’s SME sector, particularly those integrated into the supply chains of these larger businesses, he warns.

“The sudden loss of a key customer can have a devastating impact on SMEs, especially those without the financial resilience or capital structure to absorb such shocks. In these conditions, profitability becomes more crucial than ever,” he says.

“While some short-term losses can be weathered by businesses with strong reserves, companies operating without a solid profit base could face serious challenges ahead.

“For many, a fundamental restructuring may be necessary — not just to deal with the loss of a major client, but to adapt to a low-growth, high-risk economic environment.”

Friel Stafford partner Tom Murray says the fact that insolvencies were down on industry predictions and expectations in Q4 2024 and Q5 2025 doesn’t mean it’s not a challenging environment for many businesses.

“The volatile environment regarding their imposition, the subsequent postponement, the ‘will they, won’t they’ means that anyone commentating on the potential impact of tariffs is speculating at best,” he says.

“I would be of the view that business owners need to be minding the fundamentals of their business.

“Not taking any unnecessary gambles or risks and making informed decisions based on professional advice will go a long way towards minimising the potential impact of tariffs.

“We are finding that we’re being approached at an earlier stage [by businesses in financial difficulty], which is allowing us to help turn businesses around without resorting to formal restructuring procedures.”

Dillion Eustace agrees with Deloitte’s prediction of 1,000 insolvencies in 2025, and sees real estate, hospitality, retail and construction as the sectors continuing to be most affected.

Jamie Ensor, partner and head of restructuring and insolvency at the law firm, says: “Without any of us being able to predict what level of tariffs will apply to the EU over the medium to longer term, at the moment it is uncertainty that is the drain on time and resources for businesses trying to strategise.

“The Irish food and drink sectors are noticeably exposed because they are selling what tend to be premium products into markets in the US that are already competitive.”

Ensor cites research released by ACCA Ireland, which found that 36% of businesses surveyed thought government supports would be required if US tariffs were to proceed — with 43% seeking clearer guidance and advice from the government and 38% seeking assistance to explore new markets.

Conducted immediately prior to the 90-day pause on tariffs announced by Trump on April 9, the survey revealed that 72% of Irish businesses had not taken steps at that time to mitigate the potential impact of trade tariffs from the US.

The majority of companies were confident that the initial tariff imposed on the EU by the Trump administration would not proceed as planned, with 60% believing the US president would seek to negotiate with the EU.

From the outset, almost 70% of businesses didn’t want immediate responsive tariffs. Instead they wanted the EU to engage and negotiate a deal with the US.

“Businesses needing government support if tariffs are imposed presents a difficulty for the Irish government because the response to tariffs is really an EU competency at this point as well as such supports possibly breaching state aid rules,” Ensor notes.

While it remains to be seen what supports could be available to businesses exposed to tariffs, Barry Cahir, partner and head of corporate restructuring and insolvency at Beauchamps, says the early suggestion is that the government might provide balance sheet support.

“This could be direct or indirect financial measures designed to strengthen the financial position of companies — especially their assets or liabilities — to help them to survive and recover,” he says.

“In short, balance-sheet support is about directly stabilising the financial foundation of firms — not just offering temporary liquidity.”

In practical terms, such balance sheet support could include loan guarantees and debt restructuring or forbearance schemes, Cahir says.

“Loan guarantees involve the government guaranteeing a dedicated portion of loans made by banks to businesses.

“This improves a firm’s access to credit and can strengthen the balance sheet by lowering borrowing costs,” he explains.

“Government-led or supported debt restructuring or forbearance schemes may help businesses to renegotiate or temporarily suspend debt repayments to ease immediate financial pressures.

“Ultimately, the effectiveness of any supports will depend on their timely implementation and the ability to tailor them to the specific needs of businesses facing tariffs.”

Based on the level of interaction Crowe Ireland has had with its clients so far in 2025, Declan Hanly, director of corporate restructuring at the firm, expects the recent quarterly downward trend in insolvencies to be reversed as we progress through the year.

“The impact of the current geopolitical landscape will likely have some effect on Irish businesses, particularly those significantly exposed to exports and imports,” he says.

“But I believe existing issues will be the more significant cause of business failures. Many SMEs are still repaying taxes which were warehoused during the Covid-19 pandemic.

“This, along with meeting the everyday costs of doing business, is putting financial strain on many companies.”

Irish consumer confidence dropped to a nine-month low in March, according to the Credit Union Consumer Sentiment Survey.

Hanly says it is likely to fall even further due to the anticipation of a global recession being just around the corner as a result of trade wars and the potential impact of tariffs on costs for consumers.

“Therefore, I foresee distress rates increasing for consumer-facing sectors, including general retailers, food-outlet retailers and hospitality operators,” he says.

“Many of these businesses are already operating on thin net profit margins. A dip in sales following a pullback from consumers can quickly cause cash flow stress that leads to directors needing the help of an insolvency practitioner to guide them through their options.”