Twelve months ago, economic commentators and financial institutions were predicting an economic bounce in the second half of 2021. A narrative that is supported by our latest CRIF Vision-Net data which shows that there was a 28% growth in new start-ups in the first nine months of the year.
However, it is interesting to note that this bounce in new start-ups was largely concentrated in the first half of the year, with a slowdown occurring in the third quarter.
When we examine the start-up figures for year to date, the growth this year has been disproportionately concentrated in the first six months of the year, which saw a 42 percent increase YoY. In contrast, Q3 recorded a more modest growth of four percent, versus Q3 2020.This slowdown in start-up growth perhaps reflects a more stable operating environment and a return to business as usual for many industries.
That said, the construction and hospitality sectors still continue to navigate their way out of the short- and long-term impacts of Covid restrictions. According to the data the construction industry experienced a modest growth of four percent in start-ups this quarter. Meanwhile the hotel and restaurant sector experienced a four percent decrease in start-ups.
While a year-on-year decrease in insolvencies across the two sectors is encouraging at face value, possibly more telling again is the high number of businesses in these sectors that are currently classified as high-risk.
Unsurprisingly, the hotel and restaurant sector continues to be the most at risk sector, with approximately three in five companies 63 percent in this space being categorised as ‘high-risk’. This represents a five percent increase on Q3 2020. However, this figure still compares favourably to this time five years ago, when 66 percent of companies in the sector were categorised as ‘high risk’. The construction sector 58 percent also featured prominently in the high-risk category.
In recent weeks, we have seen positive Central Bank of Ireland growth projections and a largely well received Budget 2022. It is therefore important that we build on this positive market sentiment and critically, that we continue to look for ways to support the most at-risk sectors to bridge out of recent Covid challenges and give them the confidence and infrastructural support to move to a growth mindset as we approach the year end.
Source: CRIF Vision-net