Ms Fiona O'Dea:

I thank the Deputy. She makes the point that insolvency rates are rising; however, they are below pre-pandemic levels.

The Deputy mentioned the PwC insolvency barometer. It reveals that the current annual failure rate is 29 companies per 10,000 which is below pre-pandemic levels of 36 companies per 10,000 in 2019. Obviously, there has been an increase but it still remains at historically low levels. As the Deputy mentioned, the gradual return to pre-pandemic levels of insolvency is seeing a parallel upward trend in the number of companies availing of SCARP and examinership. The use of SCARP increased by 50% in 2023, from 22 to 33 cases.

We do not believe there is any clear evidence to support the proposition that we are facing in to a serious insolvency situation or a tsunami. The Central Bank's financial stability review of 2023 did not raise alarm bells regarding insolvency spikes or SME impacts. That review notes that corporate insolvency has continued to rise from historical lows but that this trend appears to relate primarily to firms that exited the pandemic in weak financial condition. It also reports that most companies entering insolvent liquidation in 2023 claimed wage subsidies during the pandemic.

Previous analysis by the World Bank indicates that it took 13 quarters for the impact of the financial crisis in 2007 to be felt before there was a peak of insolvent liquidations. We are now in that time lag, three years on from the pandemic, and we are not seeing that tsunami coming at us. Even if there is a spike, it is worth noting that the IMF ranks Ireland 14 out of 60 countries in its indicator for crisis preparedness of insolvency systems. This is in large part due to our insolvency regime which rests on an established framework in which there are a number of factors at work. We have a greater use of technology in our insolvency processes which increases efficiency. There are virtual meetings, remote voting systems and electronic communications. We also have professionals. We have insolvency practitioners who are appropriately regulated and support various aspects of the insolvency process. We also collect and analyse insolvency data to help assess the performance of the system and to support the design of inner reform. It is evidence based.

As we mentioned, we have extended our insolvency toolkit to include SCARP, reducing court involvement in solvency cases and allowing for the restructuring of viable firms within a limited period. We have well-established liquidation proceedings which provide for a clear exit mechanism for non-viable companies and facilitate the redeployment of assets to more productive uses. In addition, a complete set of targeted supports has been deployed to address distressed situations in firms.