In Bavaria and Baden-Württemberg, there were more company bankruptcies in August than in the last eight years. Nationwide, the number of bankruptcy filings fell slightly last month, but rose dramatically year-on-year. In particular, more large companies went bankrupt, which caused the number of employees affected by bankruptcy to skyrocket. There is no quick end in sight to this trend.
These are the main results of a still unpublished survey by the Leibniz Institute for Economic Research in Halle an der Saale (IWH), which South German Newspaper The research institute has been determining the number of bankruptcies in Germany since January 2016. Its monthly IWH insolvency trend is based on data from the latest insolvency announcements by German registry courts, which are linked to the balance sheet figures of the companies concerned. It includes partnerships and corporations; micro-enterprises are not taken into account because they are not relevant enough to the economy as a whole, according to the IWH experts.
Nationwide, the analysis of the August data showed a nine percent decline in company bankruptcies compared to the previous month. Compared to August 2023, however, the number of insolvency applications in Germany was 27 percent higher. What the experts noticed: The company bankruptcies are increasingly having an impact on the labor market. This has to do with the fact that more and more large companies are running out of steam. The largest ten percent of companies that went to bankruptcy court in August employ a total of more than 15,000 people who are now worried about their jobs. According to the IWH experts, this also means that 84 percent more employees were affected by bankruptcies than in the August average of the pre-Corona years 2016 to 2019.
Bavaria recorded the largest increase in insolvencies at 60 percent
There have been particularly many company bankruptcies recently in Bavaria and Baden-Württemberg, and the IWH has reported a “record level of insolvencies” in both federal states. According to the report, 203 companies in the Free State and 163 in the Ländle had to go to bankruptcy court because they were over-indebted or insolvent. Around 4,000 jobs are affected in both states. In Bavaria, it is mainly companies in the housing sector and business-related service providers that are struggling. What is striking is “the sharp increase in insolvencies in the real estate trade, for example among project developers, who are clearly affected by the effects of a previously overheated real estate market and by high construction costs and rising interest rates,” according to the IWH experts. Around 1,700 jobs in Bavaria are at risk in insolvent companies, by far the most in the greater Munich area.
In Baden-Württemberg, trade, industry and the construction sector are particularly affected, especially in the Stuttgart metropolitan area. According to IWH research director Steffen Müller, the state recorded between January and August “one of the strongest increases in insolvencies in Germany, with an increase of around 50 percent compared to the same period in the years before the corona pandemic, only surpassed by Bavaria, where the increase was 60 percent.”
According to the findings of the Halle researchers, the situation in the housing industry in particular has deteriorated significantly across Germany in the longer term. The number of bankruptcies in the real estate and housing sector, from around 30 cases in January 2020, has roughly tripled since then, according to the IWH. The real estate trade has also seen a sharp increase in bankruptcies since mid-2022. The number of monthly applications has roughly quintupled since January 2020. The main reason for this is increased financing costs, which in turn caused demand to fall. “The bankruptcies in the real estate industry are also the result of a low interest rate phase that lasted for years and then abruptly ended, to which increased construction costs were added on top,” says Steffen Müller.
The head of insolvency research at the IWH sees no signs that the number of company bankruptcies in Germany will decrease in the autumn: “Based on our leading indicators, we expect a renewed increase in bankruptcies in September and October,” says Müller.