New research into the Small Company Administrative Rescue Process (SCARP) scheme has shown that 206 jobs have been saved so far this year as the number of businesses starting the process drops significantly.
The SCARP scheme was first introduced in late 2021 to help small and micro companies who are still viable, yet insolvent, restructure their debts, avoid liquidation and ensure creditors get a better outcome rather than the company being wound down.
The scheme involves a process advisor being appointed to prepare a rescue plan for the business and to work with creditors to consolidate company debts.
Research conducted by the SCARP advisory group Azets Ireland has found that during the first six months of the year, 13 SCARPs were commenced by small and micro companies, which is down 28% on the same period in 2023, with hospitality accounting for the greatest number of cases.
Advisory and Restructuring Partner at Azets Ireland Dessie Morrow said their research shows that 206 jobs were saved so far this year as a result of the businesses going through the scheme.
“It has demonstrated clear success in enabling viable businesses to streamline restructuring and continue trading,” he said.
There were 40 jobs saved in the hospitality sector, with a further 39 saved in the construction sector, and 36 in the tech sector. Mr Morrow said the low level of uptake so far this year “appears to indicate” that the “immediate storm of financial pressures facing small businesses has abated somewhat”.
“Revenue’s phased approach to repaying warehoused tax debt, the support provided by the Government to small business and a growing economy are working together to support the resilience of Ireland’s small and medium-sized enterprises,” he said.
However, Azets warned that there are still a number of issues persisting for smaller businesses including inflationary pressures which look set to continue to hit many sectors over the medium term particularly those in hospitality.
Mr Morrow said that awareness of SCARP remains “too low” among many business owners adding that it is an “important restructuring option”.
In total, 68 small businesses have undertaken the SCARP since its creation with 33 of those having undertaken the process in 2023 alone. Of the 68 processes, Azets Ireland advised 25 of them.
Following the conclusion of the Government’s tax debt warehousing scheme at the start of May, there are now over 12,500 businesses across the country that have agreed phased payment arrangements with Revenue on around €1.65bn.
Azets Ireland said that this could mean a greater number of small businesses may need to restructure in the months ahead as the viability of those payments have “not been road-tested”.
Last month, two reports by accounting firms Deloitte and PwC found that insolvencies were 25% higher for the first half of 2024 when compared to the same period last year.
The current annual insolvency rate is 29 per 10,000 businesses, with PwC adding this has “remained steady” during 2024. The current rate has doubled since 2021 when it was 14 per 10,000 businesses, although it still remains far below the previous peak of 109 per 10,000 businesses back in 2012.