There was a 28% increase in the number of SMEs enquiring about liquidation options in the final three months of 2022, the Association of Chartered Certified Accountants (ACCA) has found.
A recent survey of financial auditors by the professional accountancy body showed there has also been a 30% increase in the number of businesses seeking support on how they can protect themselves against bad debt.
ACCA said the findings reflect the challenging economic environment for small businesses who battling with rising energy, labour, supply chain and borrowing costs.
When asked how businesses are managing increased costs, 44% said they were being passed onto customers, with 39% being absorbed into the business and a further 12% being offset through operational efficiencies.
Commenting on the findings, Caitriona Allis, head of ACCA Ireland said: “This survey, which has been conducted solely amongst auditors who assess and verify business performance and play a pivotal role in supporting SME growth, reflects an uncertain and complex operating environment for many small businesses.
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“While there is optimism in the ability of the economy to weather the current storm, growth has stagnated in certain sectors driven in no small part by consistently high levels of inflation and rising costs, and this is resulting in more SMEs seeking to review their financial options and protect their assets.
“Indications that inflation has peaked with the most recent rate falling to 8.2% in December from 9% the previous month and energy inflation also falling by nearly 10% is positive news for businesses, and hopefully SMEs that are struggling can start to see a more settled trading environment soon."
Allis added: “Government support remains crucially important to stem the challenging tide that many SMEs have been facing, and the retention of energy credits after February for struggling businesses would go a long way to support those that are most at risk.”
Deloitte said in December that more than 500 corporate insolvencies had been recorded last year, an increase of 29% year-on-year, as insolvency activity returned towards pre-pandemic levels following the withdrawal of Covid supports.
PwC forecast that the Irish economy would lose more than €2bn as a result of business failures in 2022, with the insolvency rate running at 17% of peak levels recorded in 2012, or 18 per 10,000 companies in the 12 months to last June.
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