Outsourcing offers lifeline amid Ireland’s high insolvency rates
DUBLIN, IRELAND — Ireland is experiencing its highest rate of corporate insolvencies since 2018, with a 25% increase in the first half of 2024 compared to the same period last year.
According to a Deloitte report, 412 businesses have gone under since January, with the hospitality sector being the hardest hit, showing an 88% year-on-year increase in insolvencies.
This trend has raised concerns about the future of small- and medium-sized enterprises (SMEs) in the country.
Record-breaking insolvency rates shake Irish business landscape
Deloitte’s latest Insolvency & Restructuring Statistics reveal that Ireland is on course for over 800 insolvencies this year, the highest number since 2017, when 874 businesses were insolvent.
The increase is primarily driven by Creditors’ Voluntary Liquidations (CVLs), which increased 71% from the same period last year.
PwC’s Insolvency Barometer also highlights a similar trend, with 416 insolvencies recorded in the first half of 2024, up from 331 in the same period last year. PwC forecasts that if this rate continues, the total number of insolvencies could approach 1,000 by the end of the year.
Government response and expert warnings
Despite the alarming figures, the government has downplayed fears of a “tsunami” of insolvencies.
Fiona O’Dea from the Department of Enterprise stated that the numbers remain at “historically low levels.”
However, experts like James Anderson, a turnaround and restructuring partner at Deloitte, warn that the country is on course for over 800 insolvencies by year-end, the highest since 2017.
The hospitality, construction, and services sectors have been particularly badly hit. In the services sector, 154 businesses have declared insolvency since January, while some 77 businesses in the hospitality sector have closed in that time.
Small business owner Gráinne Mullins, who owns Grá Chocolates, said on LinkedIn that the prices for 24 ingredients she uses are rising, some by 69%. At the same time, the rent on her business unit will be nearly doubling to €70,000 ($75,000).
“It’s hard to see the future when costs just keep rising and rising,” she said.
Outsourcing as a strategic solution for SMEs
In this challenging environment, outsourcing has emerged as a strategic solution for SMEs to navigate financial difficulties and remain operational.
By outsourcing non-core functions such as accounting, payroll, and customer service, SMEs can significantly reduce costs and focus on their core business activities.
Benefits of outsourcing for struggling SMEs
- Cost savings. Outsourcing allows SMEs to avoid the high costs associated with hiring and training in-house staff. This is particularly beneficial for functions like accounting and payroll, where specialized expertise is required.
- Access to expertise. SMEs can gain access to a wealth of knowledge and specialized skills that may not be available in-house. This is crucial for maintaining compliance with local regulations and staying updated with industry trends. Outsourcing firms bring a team of professionals who are well-versed in the latest financial regulations and best practices.
- Scalability and flexibility. Outsourcing provides the flexibility to scale services up or down based on current business needs. This is particularly useful for businesses experiencing rapid growth or seasonal fluctuations. An external firm can adapt to these changes seamlessly, ensuring that financial management aligns with business goals.
- Focus on core activities. By delegating non-core functions to external experts, SMEs can concentrate on strategic activities that drive growth and profitability. This leads to better overall business performance and efficiency.
