561 jobs saved due to SCARP small business recovery process in the past two years

by Gazette Reporter
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The inaugural Azets SCARP Index released has shown that 561 jobs have been saved to date as a result of the rescue process for small and micro companies since its introduction exactly two years ago.

The Small Company Administrative Rescue Process (SCARP) aims to facilitate simplified out-of-court debt restructuring for small businesses deemed to be viable. A process adviser is appointed under the scheme to prepare a rescue plan and to work with creditors to consolidate company debts.

The Azets SCARP Index has revealed a marked increase in the use of the SCARP process this year. 50 small businesses have undertaken the SCARP process since its creation in December 2021 with 22 firms having gone through the process in 2022 and 28 SCARPs have commenced so far in 2023, an increase of approximately 27 per cent.

According to research undertaken by Azets Ireland, the retail, hospitality, construction, and advertising sectors accounted for half of all SCARP cases to date. Among the businesses to have successfully exited SCARP with the support of Azets Ireland process advisors were Linen Bundle Europe, Airmid Health Group, China Sichuan restaurant Sandyford, Brasserie Sixty6 and Rustic Stone.

More than half (54 per cent) of the small businesses availing of the SCARP small business recovery process were located in Dublin while 74 per cent were based in Leinster. Only 14 per cent of SCARP cases involved small businesses based in Munster and 8 per cent of the small businesses were based in Connacht.

To date, four restructuring experts at Azets Ireland have acted as SCARP process advisers in 19 out of the 50 cases undertaken in the State to date. SCARPs successfully concluded by Azets Ireland have resulted in 293 jobs being secured as a result of the viable small businesses availing of the process to asset the survival and restructuring of an insolvent company.

Of the 19 cases, rescue plans have been approved for 16. This indicates a SCARP success rate of over 84 per cent for the firm and the process is now readily recognised as an important useful restructuring tool in the armoury of business owners who may be encountering financial difficulty.

Dessie Morrow, Corporate Recovery Partner, Azets Ireland, said: “As we mark its second anniversary, the SCARP small business recovery process has proven to be a lifeline for hundreds of indigenous firms facing financial distress, saving 561 jobs in its first two years.This is a testament to the effectiveness of the process in helping viable small businesses to restructure their debts and continue contributing to the economy and to local communities.

“The introduction of SCARP provided a cost-effective restructuring process for certain small or micro businesses who were grappling with solvency issues in the wake of the pandemic and who needed support. Over the past two years, Revenue has engaged positively in the SCARP process and has been an active supporter of SCARP rescue plans for viable businesses. However, the threshold for securing Revenue support has increased in the past year.

“SCARP is needed now more than ever. In a time of lingering inflation, rising wages, higher interest rates and a slowing economy, many Irish small businesses are facing an extremely challenging environment. The retail and hospitality sectors are more exposed to these headwinds and are most likely to see a reduction in their already tight operating margins. 

With over 60,000 Irish businesses faced with having to pay back Revenue close to €2bn in warehoused debt in May next year, an increasing number of small businesses may need to restructure. SCARP is a vital tool in the armoury of small business owners who may encounter financial difficulty in the months to come.

As darker clouds loom on the economic horizon, it is important that we put the spotlight on the positive outcomes that can be secured for business owners who feel unable to trade through current difficulties and are considering a liquidation.”

To find out more about the Azets SCARP Index, visit www.azets.ie.

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