Navigating uncertainty: Restructuring trends and key advice for Irish SMEs
The impact of shrinking profit margins and tight cashflow for many hospitality and tourist facing businesses in 2025, is increasingly requiring their owners to seek expert guidance to navigate insolvency risks and secure a path to recovery. At Crowe Ireland, our Corporate Restructuring & Insolvency team has seen a rise in demand from restaurants, hotels, and other tourism-reliant SMEs, particularly around the Small Company Administrative Rescue Process (SCARP), as these businesses face ongoing challenges stemming from legacy debts, staffing shortages, increased operating and tax related and fluctuating visitor numbers.
A year of restructuring: The SCARP advantage
Over the past year, we’ve advised a number of distressed hospitality and tourism businesses to explore use of the SCARP rescue process as a way to reduce liabilities and restructure operations. Designed specifically for small businesses, SCARP provides a lower-cost, faster alternative to examinership. For many clients, this has been a lifeline—particularly those still burdened by tax warehousing debts from the COVID-19 pandemic, those grappling with seasonal cash flow volatility or needing to reduce their rent and rent arrears situation.
A key part of our approach is to promptly establish Revenue’s willingness to participate in a SCARP. If Revenue opts out, companies often pivot to a Creditors’ Voluntary Liquidation (CVL), where we act as the liquidator. In these situations, we can facilitate the sale of viable business divisions to directors or investors—transactions governed by strict rules around transparency and creditor notification.
Market outlook: Restructuring demand set to rise
Despite recent quarterly figures suggesting a dip in insolvencies, 2024 saw a 16% year-on-year increase in business failures, with hospitality and tourism among the most affected sectors. Rising operational costs, labour market constraints and higher cost of labour and shifting consumer behaviour including use of online ordering services are putting pressure on profit margins.
For businesses in this sector, even modest reductions in bookings or changes in spending patterns can significantly erode cash reserves. In these situations, early engagement with a restructuring advisor is essential to preserve value and explore available options.
Why early engagement matters
When a company becomes insolvent or is likely to, directors have a legal duty to prioritise the interests of creditors. Delaying action can expose directors to personal legal risks, including restriction or disqualification orders—or even personal liability in severe cases.
Early advice not only protects directors legally but also improves the company’s chances of survival. We work closely with hospitality-focused clients to explore tailored solutions such as SCARP, examinership, refinancing or informal creditor arrangements. In our experience, early action often opens up a broader range of options beyond liquidation.
SCARP’s role in rescuing viable businesses
SCARP is proving to be a vital mechanism for SME recovery. By providing a structured, cost-effective path to restructuring, it allows companies to shed unsustainable liabilities while protecting jobs, reputations, and valuable bookings or franchise agreements. However, greater awareness and creditor engagement—particularly from the Revenue Commissioners—are needed to maximise its impact.
At Crowe, we offer a free initial consultation to directors considering SCARP. Often, we hear from referring solicitors and accountants that clients leave these meetings feeling significantly more in control and optimistic about their business’s future.
Key advice for directors: Be honest, be early
Our number one piece of advice to tourism and hospitality SME’s considering restructuring is this: engage early and be transparent. Advisors are best positioned to help when they have full insight into the business’s finances, booking trends, staffing plans, and cost base. Concealing key issues or delaying difficult conversations can lead to broken trust with stakeholders and fewer options on the table.
A realistic view of your business’s potential and clear communication with creditors, staff and advisors are crucial to building a viable recovery plan.
Directors’ legal duties in insolvency
When a business is facing insolvency, directors must tread carefully—especially when making payments, repaying loans or disposing of assets. Favouring certain creditors or engaging in connected-party transactions without justification could be challenged by a liquidator and potentially reversed.
To avoid sanctions, directors must maintain up-to-date management accounts and cash flow projections to support decisions to continue trading. Above all, they must be able to demonstrate that they acted responsibly and in good faith.
Conclusion
In the current economic climate, insolvency and restructuring issues are an unavoidable reality for many businesses in the tourism and hospitality sector. Yet with the right advice and timely action, there are real opportunities to rescue viable businesses, protect jobs and ultimately rebuild for the future.
At Crowe, we’re committed to helping businesses navigate these challenges with clarity, transparency, and a path forward.
If you are a company director concerned about your business’s financial position, get in touch for a confidential consultation with our Corporate Restructuring & Insolvency team.
