Economy in the Corona Pandemic
The number of company bankruptcies has increased for the first time since 2019 – but no wave of insolvencies in sight
The insolvency forecasts of many experts have so far come to nothing – even if there have been more bankruptcies for the first time since November 2019
© Hauke-Christian Dittrich / DPA
In Germany, the number of corporate insolvencies has risen for the first time since September 2019. However, there is still no wave of insolvencies, which is often invoked. However, the situation is different in the case of personal bankruptcies.
The mind game of many economic experts actually sounded logical: due to the corona pandemic, the interim contact restrictions and the closure of catering and cultural facilities, many companies will go bankrupt. Not immediately, because the state made aid payments, but then in any case in the course of 2021. But these fears have not come true so far.
According to the Federal Statistical Office, a total of 1094 company insolvencies were reported in November 2021 – 4.6 percent more than in the same month last year. Compared to the pre-Corona period, however, this value is still low. It is 22.6 percent lower than in November 2019.
According to the authority, 12,832 companies in Germany filed for bankruptcy between January and November 2021. At 12.2 percent, this value is also significantly lower than in the previous year.
Pandemic, lockdown and few bankruptcies – how does that fit together?
When gastronomic and cultural businesses had to close in March 2020 and the economy was shut down in many parts, many economic experts predicted a wave of insolvencies in Germany. The federal government tried to counteract this with Corona aid money and a more generous interpretation of short-time work benefits. The obligation to report insolvency applications due to insolvency or overindebtedness was also temporarily suspended. Accordingly, many experts expected significantly more company bankruptcies in 2021, since this reporting obligation has been in full force again since May 1, 2021 and the majority of companies have not yet digested the drop in sales. So how does the comparatively small increase in bankruptcies fit into the picture?
According to the Federal Statistical Office, the aid money from the federal government and the short-time allowance are the decisive points. These have been repeatedly extended in recent months. However, this obscures the true economic situation. “The after-effects of the pandemic will only be fully reflected in the insolvency figures after the expiry of the generous short-time work benefit regulations,” explained Steffen Müller from the Leibniz Institute for Economic Research Halle of the DPA.
There is currently no sign of this. The standard insolvency proceedings applied for fell by 17.2 percent from December 2021 to January 2022. And this will not change any time soon, predicts Müller: “The number of insolvent partnerships and corporations will also be low in the coming months.”
Number of private bankruptcies almost tripled
So everything is in balance in Germany as a business location? Not quite. Even if the number of company bankruptcies is currently low, the situation is different with consumer bankruptcies. Compared to November 2020, the number of personal bankruptcies rose by 181.4 percent, almost tripling. Between January and November 2021, a total of 73,520 people in Germany filed for personal bankruptcy.
However, the Federal Statistical Office emphasizes that many of the procedures were calculated during this period. Since October 1, 2020, the new law for the gradual shortening of residual debt discharge procedures within three instead of six years has been in force.
The aim is to enable people to restart their economy more quickly after insolvency proceedings. It can therefore be assumed that many over-indebted private individuals have withheld their bankruptcy application in order to benefit from the new regulation.
How the economic situation and the number of insolvencies – whether business or private – will develop in the coming months will depend on a number of factors. In addition to further action to combat the pandemic and the associated economic cuts, the increase in the key interest rate by the European Central Bank could also play a role.
Should this be increased by more than one percent, this could in turn bring companies that are dependent on credit into (greater) financial difficulties.
Source: Federal Office of Statisticswith material from DPA