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SCARP success rate almost 80% – Deloitte

A scheme designed to provide a more cost-effective restructuring process for smaller companies recorded a success rate of almost 80% last year, according to figures from Deloitte Ireland.

The firm’s latest statistics on insolvency and restructuring show that there were 33 SCARP (Small Company Administrative Rescue Process) appointments in 2023.

The figures show that 78% of these were successful, saving just over 200 jobs.

Deloitte’s statistics also reveal, however, a 25% increase in insolvencies compared with 2022.

Pre-pandemic levels

James Anderson (turnaround and restructuring partner at Deloitte Ireland) said that the 663 corporate insolvencies showed a return to pre-pandemic levels, adding that cautious consumer sentiment, cost inflation, and higher interest rates were starting to affect many businesses.

Of the 663 insolvencies, 261 were in the services sector, with 93 of these in financial services.

Insolvencies in the hospitality sector jumped by more than 60% to a total of 99 last year. Construction insolvencies also climbed by more than 60% to 89.

Commenting on the SCARP success rate, Anderson described the scheme as “an effective process” that provided SMEs with “a timely and cost-effective opportunity to restructure”.

He added, however, that the scheme was not yet being widely considered by advisors and business owners.

Examinership activity low

Deloitte’s figures show that creditors’ voluntary liquidations (CVLs) continued to account for the majority of insolvencies last year, with 470 representing just over 70% of the total.

Court liquidations accounted for 6% of total insolvencies, with 2023 activity levels increasing by just over 30% to 38 appointments.

There were 106 corporate receiverships last year – up 23% compared with 2022.

Despite increasing by 60% since 2022, examinership activity levels remained low in 2023 with 16 recorded. This represented just 2% of all insolvencies, despite a success rate of over 80%.