New company registrations down, but Central Bank finds no evidence of rising insolvencies
The Covid-19 pandemic has not led to an increase in company insolvencies, according to new research from the Central Bank.
A report published today by the Central Bank suggests this is down to
Government supports, loan payment breaks and forbearance from
creditors.
The report also finds there was a sharp reduction of 36% in the
registration of new companies between March and May of this year.
While there was a rebound over the summer, the number of new companies being established is still below 2019 levels by 10%.
The report noted that registration of companies in the Accommodation
and Food sector showed the steepest declines of 50% compared to the same
time in 2019.
The rebound in registrations over the summer featured a lot companies
in the Retail sector conducting sales by mail order or over the
internet.
Early in the pandemic, company directors could not meet creditors
safely so the number of insolvencies recorded actually declined in
April.
Company law has since been changed to allow for virtual meetings to take place.
Over the period from March to September, the insolvency rates for
companies in Accommodation and Food as well as Retail and Recreation
picked up but the Central Bank noted they are at pre-pandemic levels
“despite the scale of the economic shock”.
The Central Bank warned that the current relatively low insolvency
rate “may not last indefinitely given the vulnerable state of many
firms”.
It also warned of pressures from a second wave of Covid-19 and the possibility of Brexit without a trade deal.
The experience of companies in Ireland is replicated in other countries, according to today’s report.
