Just as the UK economy struggles at present, Ireland’s in the European Union is not faring much better. Ireland’s reliance on multinationals and international exports means “global shocks” pose a great challenge for the Irish economy.
A study from the Economic and Social Research Institute described the outlook for the Irish economy “as relatively favourable”. However, the report warns the country is vulnerable to external risks and “unforeseen shocks”.
Company insolvencies will spike in January, a leading insolvency practitioner has warned, as small businesses grapple with the costs of the auto enrolment pensions scheme a rise in the minimum wage and Christmas VAT bills.
The extra strain on cash flow will come amidst signs already this year of a pickup in creditor-led enforcement actions, Dessie Morrow of Azets Ireland (Audit services firm) said. Morrow now expects “a significant spike in small businesses closing their doors in the early months of 2026”, unless there are new supports offered.
A delay between higher employment costs from January and reduction in the VAT rate for hospitality to 9 per cent in July will likely mean some struggling operators in that sector shut before they can benefit from the controversial Budget move, he said.
Business operators trading through the busy Christmas period need to prepare for the tougher January conditions, including assessing the Small Company Administrative Rescue Process (Scarp) as a potential option to reduce debt, he said.
Waiting until Revenue or other creditors move towards enforcement action can mean it is too late to save a business, he said. Revenue has shown flexibility and will engage with operators in order to save jobs, unless they have reason to be distrustful such as a track record of non-compliance, he said.
“While certain aspects of the multinational sector continue to grow many small indigenous businesses are struggling to cope with the challenges of rising costs and economic uncertainty.
Many of these businesses particularly in the hospitality and retail sector may manage to continue trading through the busy festive season, but more firms could face closure in early 2026”, Morrow said. The Azets Scarp Index shows there has been a 23 per cent decline in the number of firms entering the Scarp process this year, compared with 2024. Uptake since 2020, when the process was introduced has averaged around one business every two weeks.
Hospitality (30 per cent) was the sector with the highest proportion of Scarp cases this year, followed by construction (11 per cent) and retail (7 per cent). Morrow says 1,448 jobs have been saved through the Scarp process since the launch of the process.
Azets Ireland’s research shows there have been 108 Scarp cases since the introduction of the scheme. Of these cases, 72 per cent have resulted in successful rescue plans. So far this year, 23 Scarp processes have commenced. A strikingly high share of these cases (70 per cent) were in Dublin.
In the UK last month, the economy suffered a rise in larger businesses entering insolvency. A number of companies filing for administration rose by 19 per cent year-on-year to 119 in October, according to data from the Insolvency Service.
A company administration is normally used by larger businesses and is more detrimental to jobs than company voluntary liquidations used by small firms. The overall number of corporate insolvencies including CVLs rose 16.7 per cent to 2,029 in October.
Financial restructuring partner at EY Parthenon, Simon Edel said the figures showed the “effect of ongoing economic, policy, geopolitical and earnings pressures”.
He added: “Firms are still struggling to offset higher employment costs either through pricing or productivity gains, while also contending with structural changes to their markets and external threats”.
Large companies have been warning about the impact of budget uncertainty on their finances. A survey by Barclays found that more than half of UK businesses have paused investment.
Andy Jalil
The writer is our foreign correspondent based in the UK.
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