As of: December 8th, 2021 11:06 am
Because of the corona pandemic, many experts have expected a sharp increase in bankruptcies in Germany. In reality, it can be seen that it is mainly consumers, and less often companies, that go bankrupt at the moment.
The German economy is struggling with delivery bottlenecks and corona restrictions in the middle of the fourth wave. That makes survival even more difficult for many companies. Nevertheless, the bankruptcies at the companies are limited. However, the total number in Germany is at its highest level in five years. This is mainly due to the record number of consumer bankruptcies, i.e. the insolvency of private individuals and small businesses. Corporate insolvencies, on the other hand, are heading towards a low point thanks to numerous government aid measures in the corona crisis. This is shown by a new study by the credit agency Creditreform.
Strong Nachol effects after a change in the law
After that, the number of all bankruptcies in Germany increased by almost 60 percent. A total of 122,100 bankruptcies were registered in 2021. In the previous year there were 76,730 cases. This steep increase was solely due to a significant increase in consumer bankruptcies of 80.9 percent and “other” bankruptcies of 70.2 percent.
This has essentially to do with a legal reform: As of this year, it is possible to pay off debts within three years instead of the previous six. “With a view to the change in the law, many affected consumers had waited to file for bankruptcy in the previous year,” explains the head of Creditreform economic research, Patrik-Ludwig Hantzsch. “Now there will be massive catch-up effects in 2021.”
Frank Schlein, managing director of the credit agency Crif-Bürgel, sees it similarly. However, because of the corona lockdowns, many people have slipped into private bankruptcy through no fault of their own. Many employees suddenly found themselves confronted with short-time working, and self-employed people lost their jobs. “From May onwards, we will also see an increase in the number of bankruptcies directly caused by the corona pandemic,” said Schlein.
Corporate bankruptcies continue to decline
In contrast to consumers, the decline in bankruptcies among companies continued. Compared to the previous year, the number of corporate insolvencies fell by 10.8 percent to 14,300 cases in 2021. In the corona pandemic, state intervention supported the economy with massive financial aid. Despite considerable restrictions in many areas of the economy, a wave of bankruptcies was suppressed in this way.
The majority of insolvency events in Germany continue to be in the service sector, which comprised a total of 8,280 insolvencies. Compared to the previous year (9,320 cases), however, a significant decrease (minus 11.2 percent) was observed. There were 3000 bankruptcies in trade (2020: 3240) and 2090 in construction (2020: 2210).
Small businesses affected more often
Contrary to the trend, there were more cases of insolvency among small businesses with annual sales of less than EUR 250,000. With 7,340 cases or a share of 51.4 percent of all corporate insolvencies, more than every second insolvency this year was a micro-enterprise (2020: 7,290 cases; 45.4 percent). As the corona crisis continued, these companies had fewer and fewer reserves.
Larger and better-known companies appear in this year’s insolvency statistics much less often than in the previous year. Around 143,000 employees were affected by insolvency this year – a significantly lower number than in the previous year (2020: 332,000). The majority of bankruptcies (84.7 percent) were in small businesses with fewer than five employees.
The trend has continued, according to which it is not so much the young, but rather older companies that go into bankruptcy. Just every second insolvent company in Germany (49.5 percent) was younger than ten years. In 2015 this proportion was 59.5 percent. Almost a quarter of the insolvent companies were older than 20 years. Creditreform expert Hantzsch explains: “With the decline in start-up activity in recent years, the number of companies in Germany and thus the number of insolvency candidates have also grown older.”
How are things going in the coming months?
According to the expectations of the world’s largest credit insurer Euler Hermes, the number of corporate bankruptcies will increase again in Germany and around the world in the coming year. The number of bankruptcies in 2022 will still be below the level from the pre-Corona year 2019, they believe.
The reason for this is the massive support measures with which the states wanted to help companies get over the corona crisis, according to a study by Euler Hermes published in October. “In 2022, bankruptcies in Germany are likely to increase again by around nine percent to around 16,300 cases,” said the head of the insurer’s branch and insolvency analysis, Maxime Lemerle. This will be particularly evident in the second half of 2022.