The number of corporate insolvencies has risen for the first time since the 2009 financial crisis. According to experts, however, a wave of bankruptcies is not in sight.
The feared wave of bankruptcies in the German economy did not materialize last year, despite rising energy prices and higher interest rates. According to the Federal Statistical Office, the number of corporate insolvencies rose for the first time since the global financial crisis of 2009. It increased by 4.3 percent to 14,590 reported cases. Experts spoke of a low level and do not expect a wave of bankruptcies in the current year either, despite the difficult economic environment.
“Since the introduction of the new insolvency code in 1999, there have only been fewer insolvencies in 2021,” said Frank Schlein, Germany Managing Director of the information service provider Crif. In the current year, he assumes that company bankruptcies will increase by almost 13 percent to up to 16,500 cases. “We don’t see a wave of insolvencies, but rather a normalization of the insolvency situation in Germany.”
The Professional Association of Insolvency Administrators (VID) expects at most a moderate increase in corporate insolvencies. “For individual sectors, such as the construction industry, the risk of insolvency will be significantly greater, if only because of the rise in interest rates,” said Christoph Niering, chairman of the association.
According to preliminary information from the Wiesbaden authority, the number of corporate insolvencies applied for in February rose by 10.8 percent compared to the previous month, after falling by 3.2 percent in January. The proceedings are included in the statistics only after the first decision of the insolvency court. In many cases, the actual time of filing for insolvency is almost three months earlier.
Energy costs, supply chains, inflation
According to Schleins, the main reasons for company bankruptcies in the past year were high energy costs, ongoing problems in the supply chains and high inflation. “Added to this was the reluctance to spend among consumers, who had less money available due to high energy prices and inflation.”
In order to prevent a wave of bankruptcies in the corona pandemic, from March 2020 to May 2021 the obligation to file for insolvency was suspended in whole or in part for over-indebted companies. Experts had expected an increase in bankruptcies after these exceptions expired.
The district courts estimated the expected claims of the creditors from the year 2022 at around 14.8 billion euros. A year earlier it had been around 48.3 billion euros. According to the information, the decline is due to the fact that more economically important companies filed for bankruptcy in 2021 than in the following year.
Payment practices deteriorated
According to a study by the credit insurer Allianz Trade, payment behavior has deteriorated significantly over the past year. This was taken as a clear indication of rising insolvency risks worldwide. “All in all, we expect around 15 percent more bankruptcies this year than in 2022 and thus a normalization of the insolvency situation,” explained Allianz Trade boss for the German-speaking area, Milo Bogaerts.
On average worldwide, bills were only paid after 59 days in 2022, 5 days later than in the previous year. In Germany it took 49 days, 4 days longer than in the previous year. That was a week earlier than usual in neighboring European countries.
Source: Stern
