Billions in aid programs in the corona pandemic have lowered the number of company failures. Is there a threat of a wave of corporate bankruptcies in the near future?
According to the credit insurer Euler Hermes, the number of company bankruptcies in Germany will fall to the lowest level in about ten years this year thanks to government aid to Corona.
In a study published on Wednesday, the experts expect a decline of 5 percent to around 15,000 corporate bankruptcies. The last time there were similar numbers were 1992 (10,920) and 1993 (15,582). In the coming year, an increase of around 9 percent to around 16,300 company bankruptcies is expected. But that is still a very low level, explained Maxime Lemerle from Euler Hermes. In 2019, the year before the crisis, there were still 18,749 cases.
“The relatively good starting position, one of the largest state support programs and the global economy picking up again have put German companies in a good starting position to adjust to the new normal,” said Lemerle.
The state has taken precautions
In order to prevent a wave of bankruptcies in the Corona crisis, the state had also temporarily suspended the obligation to file for bankruptcy if a reason for insolvency occurred, such as over-indebtedness or insolvency. Since May 1st, the obligation to file for insolvency has been fully applicable again.
According to a survey by the Institute for Employment Research (IAB) of the Federal Employment Agency, the liquidity of companies in Germany has improved significantly. The proportion of companies that consider their cash and cash equivalents to be sufficient has risen from 34 percent in May to 45 percent in September. “This increase is due in particular to the improved situation in small businesses,” explained IAB director Bernd Fitzenberger.
The situation has improved, especially in the hospitality and retail sectors, which were particularly hard hit by the restrictions in the pandemic. In addition, only 5 percent of the companies currently see their existence threatened. In spring it was reportedly 13 percent.
Further low level expected
Worldwide, Euler Hermes expects company bankruptcies to rise by an average of around 15 percent in the coming year. The number is likely to be even lower than in the pre-crisis year 2019. In the current year, the extension of numerous state programs will keep bankruptcies at a low level. According to Euler Hermes, a decline of around 6 percent is expected worldwide for 2021.
“The state support measures have achieved their goal of preventing as many bankruptcies as possible,” said Lemerle. “In Western Europe, the measures prevented every second bankruptcy, in the United States every third.”
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
