The number of bankruptcies has risen sharply in recent months. The Federal Statistical Office (Destatis) announced on Thursday that a particularly large number of bankruptcies were filed last June. Accordingly, the number of regular insolvencies rose by almost 14 percent compared to the same month last year. However, it should be noted that the Destatis figures include all insolvencies, including those of large and small companies and the insolvency of individuals. In fact, according to Destatis, the number of consumer bankruptcies has recently fallen.
By contrast, that of companies has been rising continuously since August 2022. The Halle Institute for Economic Research (IWH) specializes in the insolvency of partnerships and corporations. The credit agency Creditreform breaks down the numbers in a similar way to Destatis and came up with 8,400 company insolvencies nationwide between January and June 2023, 16.2 percent more than in the first half of 2022. According to the Halle Institute, the number of corporate insolvencies has even risen to its highest level in seven years. Last June alone, 1,050 insolvencies of partnerships and corporations were registered, 48 percent more than in June 2022. So if you only look at corporate insolvencies, the percentage increase is much higher than the increase in all insolvencies indicated by Destatis.
Galeria Karstadt Kaufhof, Germany’s largest department store group, which filed for insolvency at the end of 2022, was one of the largest corporate insolvencies so far this year. However, the process was not completed until May of this year. It was Galeria’s second bankruptcy after 2020. It is striking that other companies such as Galeria went bankrupt in quick succession: the Munich fashion chain Hallhuber, the clothing manufacturer Gerry Weber and the delicatessen chain Schlemmermeyer. With Peek & Cloppenburg, probably the largest fashion retailer in the country went bankrupt in the first half of the year, with Reno the second largest shoe chain store and with Ahlers a large menswear retailer.
Insolvencies are not synonymous with the final end for the company. Example Galeria: The department store group now wants to continue with 88 instead of 129 branches. Reorganization also serves to free companies from debt and financial obligations and can even be beneficial for owners. In the specific case of Galeria, the taxpayer also contributed more than 600 million euros to the renovation, as Creditreform notes.
Retail is not the bulk of the failures
The main reasons for the retail bankruptcies were the consequences of the corona pandemic, supply chains that had been broken in the meantime, a general slump in consumption due to increased inflation and the strengthening of online trade. In recent months, a drop in demand has also brought the pioneer of the organic food market Basic to its knees, most of whose 20 branches Tegut wants to take over. It also affected the unpackaged delivery service Alpakas, the online retailer windeln.de and the tissue manufacturer Hakle.
However, it is by no means the case that retail accounts for the bulk of the bankruptcies. Service companies such as postal, courier and express services, private guard and security services, building construction and gastronomy are exposed to a much greater risk of becoming insolvent. Small companies with up to ten employees therefore have by far the largest share of insolvency notifications. They filed eight out of ten bankruptcy applications. There are also businesses that were simply deregistered and are not included in the insolvency statistics.
According to Creditreform, it was again the large companies that caused a sharp increase in jobs. Overall, an estimated 125,000 employees are said to have been affected by the insolvency of their employer in the first half of the year. A year ago it was 68,000. This does not necessarily mean losing your job. At Peek & Cloppenburg and Reno, for example, the proceedings are not yet complete. However, Peek & Cloppenburg could be the company with the largest job cuts in this year’s calculation with 6800 threatened jobs. Even before Galeria, which already cut thousands of jobs in 2020.
In addition, bankruptcies of larger companies with many employees, such as the nursing home operator Convivo, which runs more than a hundred nursing facilities in Germany, also accumulated in the health care sector. One reason was the low occupancy rates in the area of inpatient care. The Imland company, which operates clinics in Rendsburg and Eckernförde, was taken over by the Schön Klinik Group after the bankruptcy and has 2,400 employees. The Deaconess Hospital in Flensburg, with 1,300 employees, also went bankrupt. The hospital reform now planned by the federal government should help, at least in the long term, to reduce the number of bankruptcies in private clinics again.
The number of insolvencies has recently increased because the legislator had previously relaxed the rules for registration, in particular because of the corona pandemic. Now the number is approaching the level before Corona again. However, none of the experts want to talk about a wave of bankruptcies.
According to the Halle researchers, there are at least signs of a short-term recovery. They have internally evaluated provisional bankruptcy filings and come to the conclusion that the number of company bankruptcies will probably fall slightly in July and August. This is also supported by the fact that the high June figures can be partly explained by a particularly high number of working days. At least this effect will be gone in July: fewer working days, fewer bankruptcies.