SCARP Program Rescues Jobs and Restructures BusinessesSCARP Program Rescues Jobs and Restructures Businesses The Small Company Administrative Rescue Process (SCARP) program has been a lifeline for struggling small businesses, saving over 200 jobs so far this year. The program, launched in late 2021, helps viable but insolvent businesses restructure their debts and avoid liquidation. Rescue Plan and Debt Consolidation Under SCARP, a litigation advisor draws up a rescue plan for the company and works with creditors to consolidate its debts. This allows the business to continue trading while paying off its debts over a manageable period. Decline in SCARP Applications The number of companies entering the SCARP process has dropped significantly in 2024, with only 13 cases initiated in the first six months of the year. This decrease may indicate that the financial pressures on small businesses have eased somewhat due to government support, a phased approach to tax repayment, and a growing economy. Hospitality Sector Support The hospitality sector has been the primary beneficiary of SCARP, with 40 jobs saved so far this year. Other sectors that have seen success with the program include construction and technology. Inflationary Pressures and Low Awareness Despite the recent decline in SCARP applications, Azets Ireland warns that inflationary pressures remain a significant challenge for small businesses, especially in the hospitality industry. Additionally, awareness of SCARP among business owners is still low, limiting its potential to support struggling companies. Tax Repayment Scheme Impact Azets Ireland predicts that the phased payment arrangements with the Tax Authorities could lead to a surge in small business restructuring in the coming months, as the viability of these payments has not yet been fully tested. Increasing Insolvency Rate Despite the success of SCARP, the overall insolvency rate for companies has increased in recent months. The current rate of 29 per 10,000 companies is double the rate in 2021, though it remains below the peak reached in 2012. Conclusion The SCARP program has provided a valuable lifeline to small businesses in distress, saving jobs and enabling viable companies to continue operating. However, ongoing inflationary pressures and a lack of awareness about SCARP among business owners highlight the need for continued support and education in this area.
New research into the Small Company Administrative Rescue Process (SCARP) program finds that 206 jobs have been saved so far this year as the number of companies entering the process drops significantly.
The SCARP scheme was first introduced in late 2021 to help small and micro businesses that are still viable but insolvent restructure their debts, avoid liquidation and ensure creditors get a better outcome rather than the business going bust.
The arrangement involves appointing a litigation advisor to draw up a rescue plan for the company and work with creditors to consolidate the company’s debts.
Research by SCARP advisory group Azets Ireland shows that 13 SCARPs were started by small and micro businesses in the first six months of the year, a 28% decrease compared to the same period in 2023. Most cases were in the hospitality sector.
Dessie Morrow, consultant and restructuring partner at Azets Ireland, said their research shows that 206 jobs have been saved so far this year thanks to companies participating in the scheme.
“It has shown clear success in enabling viable businesses to streamline restructuring and continue trading,” he said.
Forty jobs were saved in the hospitality sector, with another 39 saved in construction and 36 in technology. Mr Morrow said the low level of take-up so far this year “seems to indicate” that the “immediate storm of financial pressures facing small businesses has eased somewhat”.
“Revenue’s phased approach to repaying stored tax debt, government support for small businesses 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 for smaller businesses, including inflationary pressures that will continue to hit many sectors in the medium term, particularly the hospitality industry.
Mr Morrow said awareness of SCARP among many business owners is still “too low”, adding that it is an “important restructuring option”.
A total of 68 small businesses have gone through the SCARP process since its inception, with 33 in 2023 alone. Of the 68 processes, Azets Ireland advised on 25.
Since the government’s tax surcharge scheme was completed in early May, more than 12,500 companies across the country have now agreed to phased payment arrangements with the Tax Authorities for approximately €1.65 billion.
Azets Ireland said this could mean a greater number of small businesses will have to restructure in the coming months as the viability of those payments “has not been tested”.
Two reports from accounting firms Deloitte and PwC last month showed that the number of bankruptcies in the first half of 2024 was 25% higher than in the same period last year.
The current annual insolvency rate is 29 per 10,000 companies, with PwC adding that this has remained “stable” through 2024. The current rate has doubled since 2021, when it was 14 per 10,000 companies, although it is still well below the previous peak of 109 per 10,000 companies in 2012.
