Insolvencies continue to rise

One statistic that didn’t send out a positive message last week was the first quarter report on insolvencies by FGS Consulting.  The figures show that with 469 insolvencies in the first quarter of 2010, this represents an increase of 34% on the 351 recorded in the same period last year.  [In line with Rossa White’s recent discussion of the use of Irish economic statistics it is not clear why an annual comparison of the figures is made.]
However, the report also tells us that there were 435 failures in the final three months of 2009, so the quarterly change is an increase of insolvencies of just under 8%.  Data covering the period 2004 to 2009 are also available from FGS in this report with the Q1 2010 update available here.
Here’s a graph of the index FGS produce

This is not a pretty picture.  However we should note a couple of things.

1. Insolvencies are likely to be a lagging indicator.  That is, firms going into insolvency now are there as a result of poor performance of a previous period.  An upturn in economic activity is unlikely to be identified quickly in insolvency data as ailing firms from the recession will still be coming before the courts during the early stages of the recovery.
2. The data here tell us nothing about the number of employees involved in these insolvencies.  Lots of small firms failing would not have the same impact on the economy as a few large firms failing.

Looking at the Q1 2010 data at a sectoral level, Table 3 tells us that Construction and Engineering accounted for 37.7% of the total.  Retail (16.2%) and Hospitality Services (11.9%) were the other sectors to make up a double digit proportion of the total.  The remaining 34.2% was spread across 12 sectors.
At a regional level Table A1 shows that Dublin accounted for 204 or 43.5% of the 469 insolvencies in Q1 2010, and that this was an annual increase of 56.9% on the figure from the same quarter in 2009.  In contrast, 9.2% or 43 of the insolvencies were in Co. Cork and this was the exact same number of insolvencies in Q1 2009, meaning no increase on the year.