The weak economy continues to put pressure on German companies. More and more firms are sliding into bankruptcy. The growing number of major insolvencies is particularly worrying.
This year, the number of bankruptcies is likely to rise sharply again. This is the forecast of Allianz Trade, the world’s largest credit insurer. As the economy continues to struggle with the recession, the company expects the number of bankruptcies to increase by 21 percent to around 21,500 cases, it said.
Last year, there were already 22 percent more bankruptcies than in 2022. According to estimates, the number of cases at the end of the year is likely to be around 15 percent higher than the level of the last pre-Corona year of 2019. Allianz Trade does not expect the number of cases to increase until 2025, only a moderate increase of around two percent to around 22,000 cases.
The high number of major bankruptcies of companies with an annual turnover of at least 50 million euros is a cause for concern. According to the information, there were already 40 such bankruptcies in the first half of the year, including the travel group FTI and once again the department store chain Galeria.
The fashion retailer Esprit recently announced that it would be closing all of its stores in Germany. This means that the number of major insolvencies has not only risen to its highest level in the first half of 2015, but is also more than a third higher than the same period last year, it says.
Domino effects due to major bankruptcies
“At the moment, the rule is often: when things go wrong, they go badly,” said Milo Bogaerts, head of Allianz Trade in Germany, Austria and Switzerland. Large insolvencies often have a domino effect on many companies throughout the supply chain. “It is not uncommon for them to be swept along and get caught up in the downward spiral, which in the worst case also ends in insolvency.”
According to the information, the cumulative turnover of the major bankruptcies amounted to 11.6 billion euros in the first six months, which was already higher than the total damage for 2023 by the middle of the year. The average turnover of the insolvent large companies – and thus also the damage for the affected suppliers – was 290 million euros. That is an increase of 85 percent.
Construction and retail are particularly suffering
There have been many major bankruptcies, particularly in the construction and retail sectors, said Bogaerts. “Some companies were unable to meet the repayments of Corona loans or had difficulty obtaining new loans due to more restrictive lending and the much higher requirements of financing partners.” Still others were dependent on a single major customer who had lost business.
In the fashion retail sector, some companies have been hanging by a thread for years. “The consumer-oriented sectors are particularly feeling the current reluctance to buy,” said Bogaerts. In addition, container freight rates continue to be high, which is causing concern for many companies in view of the upcoming Christmas business.
Clinics also continued to face major challenges. The seven major bankruptcies in the service sector included three clinics, two tourism companies and two companies from the software and IT services sector.