Company Insolvencies in Western Europe on the Rise Again: A Breakdown
Rise in Corporate Collapses Again Gets Notable Boost in Western Europe - Business failure rates in Western Europe climb upward once more
In Western Europe, the number of company bankruptcies has seen a significant jump. According to Patrik-Ludwig Hantzsch, head of Creditreform Economic Research, the recovery has been weak, leading to a sharp increase in insolvencies.
This trend is not just a catch-up effect from the COVID-19 crisis. In 15 out of the 17 Western European countries examined, the number of insolvencies increased. The strongest increases were seen in Ireland, Greece, and the Netherlands. Even Germany, known for its robust economy, saw a rise of 22.5%, and France 17.4%.
The construction industry has been hit particularly hard, with a 15.4% increase in insolvencies. Rising costs, high financing costs, and a weakening demand have all contributed to the economic pressure on this sector.
Unfortunately, the trend isn't limited to Western Europe. Central and Eastern European countries have also seen an increase in corporate insolvencies, with noteworthy spikes in Poland, Latvia, Slovenia, Lithuania, and Estonia. However, Hungary's numbers, which had risen sharply in 2022 and 2023, have noticeably lowered the overall picture.
The United States also saw an increase of 16.6% in corporate bankruptcies. Despite moderate economic growth, high interest rates and declining consumer spending have continued to burden companies. However, the US figures are still below the pre-COVID-19 levels of 2018 and 2019.
Key Factors Contributing to Corporate Insolvencies
- Prolonged Economic Stagnation: Three years of economic downturn and stagnation have left businesses with limited opportunities for recovery or growth.
- Rising Costs: Surges in energy prices and other input costs have squeezed business margins.
- Weak Demand and Consumer Restraint: Economic uncertainty has led to reduced consumer spending.
- Geopolitical Uncertainties: Ongoing geopolitical tensions add to the volatility and unpredictability of the business environment.
- Staff Shortages and Shrinking Margins: Many sectors are grappling with labor shortages, which compound operational challenges and reduce profitability.
Sector-Specific and Country-Specific Trends
- Germany: Sectors like construction, courier services, and gastronomy have been particularly hard hit.
- France: Accounted for one-third of all Western European corporate bankruptcies, with a record number in 2023.
Legal reforms are being pursued across Western Europe to modernize insolvency frameworks and facilitate business rescue. Efforts include implementing the EU Directive on Preventive Restructuring and the Business Preservation Law (BPL) in Luxembourg.
- Patrik-Ludwig Hantzsch, head of Creditreform Economic Research, has stated that the recovery in EC countries has been weak, leading to a significant increase in employment policy issues, specifically insolvencies.
- In 15 out of the 17 Western European countries examined, there has been an increase in employment policy issues, with Ireland, Greece, Netherlands, Germany, France seeing the strongest increases in insolvencies.
- Even in countries with traditionally robust economies like Germany and France, there has been a significant increase in employment policy issues, such as insolvencies.
- Central and Eastern European countries, including Poland, Latvia, Slovenia, Lithuania, Estonia, have also seen an increase in corporate insolvencies, although Hungary's numbers have shown a recent decline.
