Status: 27.10.2022 2:15 p.m
The credit insurer Allianz Trade expects global insolvencies to increase by ten percent this year. The situation could get much worse in 2023. In comparison, however, Germany is “comparatively robust”.
Rising energy prices, supply chain problems and the significant slowdown in the economy are affecting companies worldwide. In view of the looming recession, the willingness of companies to hire new staff is worse than it has been for a year and a half. The employment barometer fell by 1.7 to 97.7 points in October, according to the Ifo Institute in its monthly survey of thousands of companies.
With the economic downturn, however, corporate insolvencies are also picking up. In a new study, the credit insurer Allianz Trade expects the insolvency situation to be significantly more severe next year.
The experts at the credit insurer assume that global bankruptcies will increase by ten percent in the year that is about to end and by 19 percent in 2023. In Germany, the increase of five percent this year and a further 17 percent in 2023 to 17,150 cases should be somewhat more moderate in comparison – and coming from a low level. “In an international comparison, Germany is comparatively robust, even if the current challenges are not leaving the local economy unaffected,” said Milo Bogaerts, head of the Allianz subsidiary in German-speaking countries.
In the first half of 2023, there is a risk of an interest rate shock, which, in combination with rising wages, is likely to hit many companies hard. Due to the high level of cash on hand, many companies can still cushion this in the current year, but in 2023 it will be tighter for many.
Worse prospects in neighboring countries
According to Bogaerts from Allianz Trade, there is a noticeable increase in insolvencies in Germany for the first time, albeit less strongly than in many neighboring countries. The construction, transport, telecommunications, mechanical and plant engineering, retail, white goods, electronics, automotive and textile industries are most at risk from rising financing and labor costs against the background of low economic growth.
According to Allianz Trade, in addition to Germany, the USA, China, Italy and Brazil are among the countries with a persistently low level of insolvency. However, the trend reversal has already taken place in most countries, especially in important European markets such as Great Britain, France, Spain, the Netherlands, Belgium and Switzerland. Overall, however, the prospects for the whole of Europe are anything but rosy, according to Bogaerts.
“Increasing insolvencies are already a reality in most countries,” says chief insolvency analyst Maxime Lemerle. “Key European markets account for two-thirds of the increase.” In China, Allianz Trade expects insolvencies to increase by 15 percent in 2023, and in the USA the increase could even be 38 percent as a result of tighter monetary and financial policy conditions.
Small businesses more affected
According to the information, smaller companies in particular are currently affected above average. “Large global bankruptcies, such as the ones we saw in 2021 and especially 2020 despite the low number of cases, are currently not the drivers behind the global increase,” it said. “All in all, Allianz Trade experts counted 182 major bankruptcies worldwide in the first three quarters of 2022, compared to 187 and 332 in the same period of 2021 and 2020.”
“In view of the numerous current challenges, it is no surprise that insolvencies are on the rise again,” says Milo Bogaerts. However, this is initially a gradual normalization of the insolvency process.
prospects for state aid
The Federal Statistical Office announced in mid-October that the number of regular insolvencies filed for by companies in Germany fell by 20.6 percent in September compared to August. “In the current situation, the prospect of further state aid has certainly contributed to some applications not being made,” said Christoph Niering, insolvency administrator and chairman of the professional association of insolvency administrators and administrators in Germany (VID). “The current increase in the number of insolvencies is not leading to mass unemployment. On the contrary: the employees affected by the loss of jobs due to the insolvency are currently finding a new job within a very short time.”
So far, state support measures have acted as a buffer and, for example, saved 2,600 companies in Germany from bankruptcy, as Allianz Trade economists estimate. “If the energy crisis worsens and the recession turns out to be worse than previously expected, the current measures will not be enough to cushion a wave of bankruptcies and there could be a significant increase in bankruptcies,” they warn. “So the insolvency process remains volatile and heavily dependent on the further development of state support.”