Fatigue among company owners after several difficult years in business may be the reason behind a slight decline this year in the number of small firms seeking protection under the rescue scheme for small companies, a restructuring expert has said.
More than 1,000 jobs have been saved through the Small Companies Administrative Rescue Process (Scarp) since its inception three years ago, new research from corporate advisory firm Azets Ireland has revealed.
Rolled out as an alternative to the examinership process, a typically costly process that requires High Court approval, some 70 per cent of the 84 Scarp cases that have commenced since 2021 have resulted in successful restructuring arrangements being put in place, Azets said.
This year, 28 Scarp cases have commenced, Azets said, a decline of 12 per cent on 2023.
The drop-off may relate to seasonal factors, said Azets advisory and restructuring partner Dessie Morrow. “Many struggling businesses may manage to trade through the busy festive season until the slower months of the first financial quarter,” he said.
However, there may also be an element of “director fatigue” at play, he told The Irish Times.
A lot of directors of businesses that would otherwise be “good candidates for Scarp” are choosing to “move on”, he said, deciding “I don’t have the stomach for restructure”.
“It’s a very strange dynamic because you’re saying to them: ‘You could save this business. It looks like it could be saved, or, if it’s not, you could welcome in someone else to take it over and save jobs’,” he said.
“But some of them just are that beaten up by debt stress ... It’s been a very difficult year for lots of different businesses.”
Some 382 jobs have been saved this year alone through successful Scarp processes, Azets said.
The hospitality sector accounted for 21 per cent of Scarp commencements this year, the joint highest proportion along with the construction sector, followed by the retail sector with 17 per cent.
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Looking back over the first three years of the scheme, 55 per cent of the businesses availing of Scarp were based in Dublin while 77 per cent were based in the wider Leinster region, followed by 11 per cent in Munster and 12 per cent in Connacht and Ulster.
“As more Irish businesses face financial distress over the coming months, it is important that they are aware of all the available options to manage these difficulties,” Mr Morrow said.
“Increasing awareness among business owners and professional advisers of Scarp and examinership is crucial to protecting and securing the future of these firms.”
He said both processes are important tools available to company directors that can offer a pathway to financial recovery and the preservation of jobs.
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