Ireland had lowest rate of insolvencies in the EU during Covid

Businesses in Ireland were less likely to go bust than in all other EU countries during the first year of the Covid-19 pandemic, according to a new report.

However, the new figures published by the European Commission also show Irish entrepreneurs were more reluctant than most European peers to set up a new business during 2020.

The preliminary figures show the rate of “death enterprises” in Ireland was just 1.6pc of all businesses in 2020 – the latest year for which comparative data is available.

It relates to 4,510 enterprises in the State which were recorded as ceasing trading that year. The rate of death enterprises represents the proportion of total active enterprises which cease to operate in a calendar year.

The figures exclude companies that are involved in mergers, takeovers, break-ups or restructuring.

Ireland’s rate of business closures was exactly half that of the country with the second lowest rate of enterprise deaths – Belgium at 3.2pc.

More than 1 in every 5 enterprises in Lithuania collapsed during 2020, and more than 1 in 10 went out of business in Bulgaria, Portugal, Denmark and Latvia.

The low rate of business failure in the immediate wake of Covid was in large measure a result of wage supports, tax warehousing and other Government funded schemes as well as payment breaks from banks and other lenders. Gradual withdrawal of that aid is predicted to trigger a wave of insolvencies, although it has yet to happen.

A spokesperson for the European Commission said the pandemic disrupted the business environment “tremendously” including the temporary shutdown of some business sectors which made many reluctant to start new businesses as the existing ones struggled to keep afloat.

The spokesperson said temporary government support schemes which were introduced to offset the impact of the crisis “may explain the resilience of the enterprise death rate in 2020.”

However, the birthrate for new enterprises here indicates a comparatively low level of new start-ups compared to other EU countries and a reluctance to set up new businesses during the pandemic.

Reporting: The Irish Independent