THE NUMBER OF jobs saved through examinership more than halved in the first three months of the year compared to the same period in 2015, according to insolvency experts Hughes Blake.
The latest finding from the Hughes Blake SME Examinership Index shows that 138 jobs were saved in the first quarter of 2016 through the examinership process, where a company in difficulty gets court protection from its creditors for up to 100 days to restructure its business.
This compared to 372 jobs saved through the mechanism during the first three months of 2015. Hughes Blake managing partner Neil Hughes said that the statistics were an indication of the upturn in the economy.
“Up until now there has been a disconnect between the recovery in the economy at large and the actual lived experience of small and medium businesses. Especially outside the urban centres, traders have told us the recovery was slow to impact on their bottom line,” he said.
“(Now) we see a pronounced shift taking hold whereby demand for the examinership corporate recovery mechanism is falling in line with increased business owner confidence and the enhanced opportunities that exist for businesses across the country.”
Speaking to Fora he added that there seems to be a “shift in the psyche of business owners” where they are less reluctant to avail of the examinership process. “There seems to be more optimism.”
However, he added that the process is still underutilised by Irish companies.
“About 22% of insolvent businesses in the US enter chapter 11 (a process very similar to examinership), but less than 2% of businesses in Ireland that are insolvent go to an examiner. There is no real reason why the number of people looking to rescue their businesses here is 10% of what it is in the US,” he said.
“I think the difference is a different psychology and a lack of awareness of the process.”
He said he expects the number of jobs saved through examinership to rise slightly in the next quarter, saying: “There are already five companies in the process now whereas five companies went through the process through the whole of the first quarter.”
Hughes also said he expects more businesses may also go into examinership due to the actions of private equity funds, many of which have purchased large amounts of loans tied to Irish SMEs.
He said some more aggressive funds may look to sell businesses quickly to maximise profits and added that SMEs may increasingly use the examinership process “as a means of fending off the advances of the private equity funds”.