The surge in corporate insolvencies within Germany remains robust. In July, there was an almost 23.8 percent rise in the number of companies resorting to standard insolvency procedures compared to the corresponding month of the previous year. The Federal Statistical Office in Wiesbaden disclosed this information on Friday, citing preliminary data
The ongoing upward trend of the past few months persists. June already saw a rise of 13.9 percent. Numerous businesses are grappling with challenges stemming from a weakening economy, escalating expenses—particularly for energy and raw materials—and heightened borrowing costs due to rising interest rates. In spite of these unfolding circumstances, experts are not anticipating a sweeping surge of company insolvencies.
Evidently, a considerable number of German enterprises are presently confronting economic pressures. The amalgamation of an economic deceleration, amplified outlays for vital resources like energy and raw materials, and escalating borrowing expenses due to higher interest rates is causing distress among numerous firms.
Notwithstanding these indicators and the repeated uptick in bankruptcy figures in recent months, specialists are not foreseeing a dramatic escalation that could be characterized as an inundation of bankruptcies.
As elucidated by the Federal Statistical Office, it’s crucial to recognize the methodology behind the statistics compilation. Conventional insolvency proceedings are only registered subsequent to the initial ruling of the insolvency court, implying that the actual insolvency application often occurred several months prior.
This could also suggest that some of the most recent bankruptcy petitions were potentially submitted during the spring, when perhaps not all of the current economic strains were as conspicuous as they are at present.
It remains to be seen how these trends will unfold in the upcoming months
This data presents a diverse panorama of corporate insolvencies within Germany:
- General trends: May witnessed a substantial 19 percent surge in corporate insolvencies compared to the same period last year. Conversely, consumer insolvencies demonstrated an opposing trend, experiencing a 3.7 percent reduction. This discrepancy implies that the financial burden is impacting companies more profoundly than individuals.
- Total accounts receivable: A particularly conspicuous escalation is observed in accounts receivable owed to creditors. These figures are now twice as high as the previous year, potentially indicating the involvement of larger or more financially robust companies encountering financial hardships.
- Insolvencies by industry: The industry-specific breakdown is equally intriguing. Notably, the “transport and warehousing” sector is at the forefront with 8.7 insolvencies per 10,000 companies. This could signal challenges within the logistics and transportation industry, possibly stemming from elevated fuel costs or disruptions in supply chains due to the pandemic. The elevated insolvency rate within “other economic services,” such as temporary employment agencies, might also point toward economic struggles in sectors reliant on flexible labour.
- Energy sector: The positive aspect lies in the low insolvency rate within the energy supply domain. This might imply stable business models, enduring contracts, or governmental support within this sector.
To conclude, Germany’s economic landscape exhibits complexity, with varying degrees of financial strain across industries. The unfolding of these trends in the coming months remains uncertain, particularly against the backdrop of ever-shifting global economic conditions.
Post Pandemic
Amidst the backdrop of the coronavirus pandemic, the federal government took a temporary measure to suspend the requirement for businesses to file for bankruptcy, aiming to stave off a potential surge in insolvencies. This measure, combined with substantial government assistance, effectively curtailed the incidence of corporate bankruptcies in recent years despite the challenges posed by the pandemic and energy crisis.
Nevertheless, starting from August 2022, there has been a gradual and consistent uptick in the count of corporate insolvencies. This trajectory aligns with the projections made by experts, who had anticipated an upswing in such cases for the current year.
Just recently, the Leibniz Institute for Economic Research Halle (IWH) unveiled its findings indicating a noteworthy surge in insolvency cases during July, surpassing the average figures for that month. Notably, within the upper echelon of companies, approximately 9,300 job positions fell victim to insolvency impacts, primarily within the realms of industry and commerce.
As per earlier reports from the credit insurer Allianz Trade, a substantial 22 percent upswing in corporate bankruptcies is on the horizon for this year. The turbulence experienced within the banking sector during the spring months has prompted a more cautious approach toward lending from financial institutions.
Nevertheless, Allianz Trade does not anticipate an overwhelming deluge of bankruptcies. Instead, the number of insolvency cases is projected to remain five percent below the levels observed in 2019, the year preceding the onset of the pandemic.