38,000 firms at risk of failure - report

RealityCheck

http://www.rte.ie/business/2010/0830/companies.html

A report from business information agency Vision-net.ie

wrote:

has found that more than 38,000 are 'high-risk' and showing signs consistent with business failure

Probably the most interesting statistic is the following

wrote:

Vision-net.ie also found that firms incorporated within the last 10 years were facing the greatest trading difficulties. The average age of a company in the high-risk category was 9.73 years.

Just comes to show how damaging credit fueled housing booms can be. Not only was about 20% of our economy based upon construction directly but many other businesses relied havily on construction based growth as a means of making money. Many businesses in things like home furnishings and materials who would have done well during the boom are finding it hard to survive. No surpise really.

The report also expects 1800 companies to go into liquidation this year, causing a knock on effect to businesses run by creditors. More companies will be hard pressed to try and recoup moneys owed from bankrpted companies. This can cause a domino effect of businesses going to the wall due to bad debts accruing from bankrupted companies.

A very long way to go before we can say with any certainty that we have turned the corner. The problems are being exacerbated, by some of the un friendly business policies that Fianna Fail and the green party are imposing on the country e.g electricity prices, the banks etc.

danbohan

RealityCheck wrote: »

http://www.rte.ie/business/2010/0830/companies.html

A report from business information agency Vision-net.ie




Probably the most interesting statistic is the following



Just comes to show how damaging credit fueled housing booms can be. Not only was about 20% of our economy based upon construction directly but many other businesses relied havily on construction based growth as a means of making money. Many businesses in things like home furnishings and materials who would have done well during the boom are finding it hard to survive. No surpise really.

The report also expects 1800 companies to go into liquidation this year, causing a knock on effect to businesses run by creditors. More companies will be hard pressed to try and recoup moneys owed from bankrpted companies. This can cause a domino effect of businesses going to the wall due to bad debts accruing from bankrupted companies.

A very long way to go before we can say with any certainty that we have turned the corner. The problems are being exacerbated, by some of the un friendly business policies that Fianna Fail and the green party are imposing on the country e.g electricity prices, the banks etc.

thats only 37989 left to go so , 11 more went today ,http://www.insolvencyjournal.ie/index.aspx

RealityCheck

danbohan wrote: »

thats only 37989 left to go so , 11 more went today ,http://www.insolvencyjournal.ie/index.aspx

Good site. Shows you exactly the types of companies that are struggling. Construction related firms (no surprise) and firms dependant on peoples disposable incomes like cab companies, garden centres and cafes (again no surprises). A lot of those comanies are just not economically viable, and have very little future regardless of Government policy. A simple case of oversupply and not enough sustainable demand.

yermanoffthetv

Jesus, when you think of it this is terrifing news. If 38k firms are in danger that means nearly the same ammount of people that are on the live register now are in danger if their company folds :eek: Dont worry tho, the knowledge economy will save us :rolleyes:

johnnyskeleton

This time last year someone would have chimed in with the simpsons quote about it be a glorious era for the repo business, but somehow it seems inappropriate to be making jokes at a time like this.

Jesus, when you think of it this is terrifing news. If 38k firms are in danger that means nearly the same ammount of people that are on the live register now are in danger if their company folds Dont worry tho, the knowledge economy will save us

I think the average number of workers (i.e. including self employed and bosses) is less than 5 in a lot of these SMEs, but a figure of 100-150k people would not be far off.

We have so far seen unemployment come from construction and a little from retail, professional services and public sector. We ain't seen nothing yet, however, and it looks like the next round of job losses will be in retail and services. PS will be the last to go, but they will have to go, eventually.

yermanoffthetv

johnnyskeleton wrote: »

This time last year someone would have chimed in with the simpsons quote about it be a glorious era for the repo business, but somehow it seems inappropriate to be making jokes at a time like this.



I think the average number of workers (i.e. including self employed and bosses) is less than 5 in a lot of these SMEs, but a figure of 100-150k people would not be far off.

We have so far seen unemployment come from construction and a little from retail, professional services and public sector. We ain't seen nothing yet, however, and it looks like the next round of job losses will be in retail and services. PS will be the last to go, but they will have to go, eventually.

My bad, I was ballparking on 10 for an SME but yea, even 150k extra would surely cripple the state? (if its not already) I dont see 2011 being a good year unfortunately

danbohan

RealityCheck wrote: »

Good site. Shows you exactly the types of companies that are struggling. Construction related firms (no surprise) and firms dependant on peoples disposable incomes like cab companies, garden centres and cafes (again no surprises). A lot of those comanies are just not economically viable, and have very little future regardless of Government policy. A simple case of oversupply and not enough sustainable demand.

true , but if you remove all buisness that need peoples disposble income a lot more than 38000 will close , their was a lot buisness opened in ireland that would need miracles to have survived even in tiger times so no suprise to see them go.

Poly

RealityCheck wrote: »

A lot of those comanies are just not economically viable, and have very little future regardless of Government policy.

I disagree.

As someone "on the ground", government red tape, rates, utilites hikes, complying with all the bullsh1t that state quangos invent to justify their existance is crippling small business.

jmayo

RealityCheck wrote: »

Good site. Shows you exactly the types of companies that are struggling. Construction related firms (no surprise) and firms dependant on peoples disposable incomes like cab companies, garden centres and cafes (again no surprises). A lot of those comanies are just not economically viable, and have very little future regardless of Government policy. A simple case of oversupply and not enough sustainable demand.

danbohan wrote: »

true , but if you remove all buisness that need peoples disposble income a lot more than 38000 will close , their was a lot buisness opened in ireland that would need miracles to have survived even in tiger times so no suprise to see them go.

There were too many kitchen suppliers, carpet providers, exclusive living shops, etc appearing in almost every town during the boom that it was always going to be unsustainable.
What surprises me is how some of them have managed to last so long.
Most of these were only ever going to succeed if the bubble and it's cheap credit flow kept going.

And of course all the while these had been keeping our employment numbers up, real sustainable jobs were disappearing due to costs of doign business in this country.

RealityCheck

Poly wrote: »

I disagree.

As someone "on the ground", government red tape, rates, utilites hikes, complying with all the bullsh1t that state quangos invent to justify their existance is crippling small business.

Oh I agree that all that can have a serious impact, but I think in a lot of cases there is just no demand for the types of business that are going out of business. The point I was trying to make is that a lot of the companies are directly construction related, indirectly or depend on peoples disposable incomes. With the state of the Irish economy, there is no prospect of peoples disposable incomes recovering to levels anywhere near Celtic Tiger era incomes. As for Construction, well we all know the story there..

jmayo

jmayo wrote: »

There were too many kitchen suppliers, carpet providers, exclusive living shops, etc appearing in almost every town during the boom that it was always going to be unsustainable.
What surprises me is how some of them have managed to last so long.
Most of these were only ever going to succeed if the bubble and it's cheap credit flow kept going.

And of course all the while these had been keeping our employment numbers up, real sustainable jobs were disappearing due to costs of doign business in this country.

yep and you`ll still hear people going on about forcing the banks to lend...to lend to what? These doomed businesses?

MrDarcy

Deleted User wrote: »

yep and you`ll still hear people going on about forcing the banks to lend...to lend to what? These doomed businesses?

We are not living in ordinary times or anything close to ordinary times. Look at the fact that 900 homes a month are being disconnected from the ESB grid. The lack of cash out there is frightening. It's not people being mean or just not wanting to pay their bills, the situation in this country leaves very little hope, it's not just businesses that have no cash, it's also the consumers that buy from businesses...

RealityCheck

Deleted User wrote: »

yep and you`ll still hear people going on about forcing the banks to lend...to lend to what? These doomed businesses?

These are the main reasons the companies are struggling as stated in the report:
1. deteriorating liquidity
2. reduced or negative cash flows,
3. lower sales or profits,
4. over reliance on debt and significant interest repayment burdens,
5. poor stock control
6. other key balance sheet indicators

No amount of lending from the banks is going to taper over those type of cracks. Bank Overdrafts can only keep a company going for so long.

jmayo

Deleted User wrote: »

yep and you`ll still hear people going on about forcing the banks to lend...to lend to what? These doomed businesses?

True enough, but sadly like in all great upheavals the innocent get screwed as well.
Thus manufacturing companies, service companies, etc that have an actual future, and some of which have been going for years, are are also getting squeezed by the banks.

danbohan

Deleted User wrote: »

yep and you`ll still hear people going on about forcing the banks to lend...to lend to what? These doomed businesses?

the really doomed buisness are the banks , many of thease buisness are as you say beyond redemption but many would in any normal country be able to trade out of their current diffcultys , this cannot happen here because our banks are not lending no matter what spin is put on it , why , because they are basically bankrupt too , a sad mess !

Mr. Presentable

My business is struggling because other businesses cannot get the cash to pay what they owe me.

This is liquidity issues, caused at least in part, by banks not extending credit. If companies are loaned money and pay their bills the money flows from me to my creditors and theirs etc. Businesses that were viable three years ago are becoming non-so because there is no credit.

RealityCheck

Mr. Presentable wrote: »

My business is struggling because other businesses cannot get the cash to pay what they owe me.

This is liquidity issues, caused at least in part, by banks not extending credit. If companies are loaned money and pay their bills the money flows from me to my creditors and theirs etc. Businesses that were viable three years ago are becoming non-so because there is no credit.

Its a domino effect thats infecting the whole economy. Its a real messy situation because there are companies out there that are in trouble and likely have no future, but at the same time there are viable companies that have a future, but because many of the companies are inter tangled, if enough companies go down we risk having good companies going with the bad. This leads to needless unemployment.

Surely 2 years after the initial banking crisis, some semblance of a banking system could be created. It would'nt have been hard to have created some kind of a good bank using the infrastructure of one of the financial institutions here, to focus on extending credit to worthy businesses. At this rate we could wait 10 years and we still wont have a functioning banking system :rolleyes:.

MrDarcy

Mr. Presentable wrote: »

My business is struggling because other businesses cannot get the cash to pay what they owe me.

This is liquidity issues, caused at least in part, by banks not extending credit. If companies are loaned money and pay their bills the money flows from me to my creditors and theirs etc. Businesses that were viable three years ago are becoming non-so because there is no credit.

The thing is that the bottom tier of debtors (retail consumers), have run out of cash because half a million of those debtors are just about surviving on state benefit and everyone else is really really struggling, there is simply no cash out there and the longer we proceed without a strategy to get confidence back into the economy, the longer we proceed without a strategy to get those 500,000 people who are barely surviving on 196 Euro a week, back up to 400-500 Euro a week, then the further we have to fall and the worse will be the nuclear winter when it eventually does come.

The debt from the bottom tier of debtors, (Joe who signs up to the gym but then loses his job and can't pay his monthly subscription), just piles funding pressures onto the next tier in the hierarchy, (say in this example the gym owners who have a load of Joe's on their books and don't have a chance of getting any money from Joe, 12 month legally binding contract or not).

Then the effects of the problem are elevated up to the next level, where Revenue or the business that supply the gym cannot get paid because they have a load of gyms that have a load of Joe's who cannot pay their bills..

So then Revenue go to court with an involuntary liquidation/receivership application to close the business, get a liquidator appointed and get their money, Revenue are preferred creditors by law so they will take what they reckon they are due out of any assets that can be liquidated, then usually there isn't much left for other creditors to fight over.

So the gym closes, so too eventually does the company that supplies the gym, the employees end up on the dole so we end up with a load more Joe's that cannot pay the gym subscription fee's.

It is this catastrophic cycle of: bad and unavoidable personal debt-->company that is owed debt closes down --> more people on the dole because company closes --> more unavoidable bad personal debt --> more company closures --> more personal bad debt --> More company closures

There is no point in supporting new or existing small businesses unless they can either operate in an environment where there are no overheads or in an environment where overheads could be slashed down to the bare minimum, or else we have change in the leadership of the country so that people are not afraid to spend the little bit of cash that they have and those that have no disposable cash (those on 196 a week), have hope that they can imminently get a secure and decent paying job.

johnnyskeleton

Poly wrote: »

I disagree.

As someone "on the ground", government red tape, rates, utilites hikes, complying with all the bullsh1t that state quangos invent to justify their existance is crippling small business.

I think the point Reality Check and jmayo are making is that, in addition to the problems faced by otherwise viable small businesses, there are also a slew of them that are not viable selling overpriced luxury items in a market that was already saturated in 2006. Think of chain cafes where there is never anybody in them in areas where people just want a quick tea and a breakfast roll from spar, or shopping areas that have 10 furniture shops and nothing else.

johnnyskeleton

Mr. Presentable wrote: »

My business is struggling because other businesses cannot get the cash to pay what they owe me.

This is liquidity issues, caused at least in part, by banks not extending credit. If companies are loaned money and pay their bills the money flows from me to my creditors and theirs etc. Businesses that were viable three years ago are becoming non-so because there is no credit.

Not to be cynical, but if you have a struggling business with a lot owed, if the banks gave them all credit so they could pay you, one option open to you would be to take the money, shut up shop and run, especially if you don't think that once their credit runs out they will have any more money.

The crucial thing is current demand / ability to pay and future demand / ability to pay. If these were good you could probably write off old debts, take the hit and move on.