Significantly more company bankruptcies - Is a wave of insolvencies looming?
The numerous crises are causing problems for companies in Germany. The information service provider Crif expects a significant increase in company bankruptcies this year and next, but does not anticipate a wave of bankruptcies. "Companies continue to face considerable challenges, including high energy costs, supply chain problems, geopolitical uncertainties and persistent inflation," explained Frank Schlein, Managing Director for Germany. In addition, increased production costs, higher personnel expenses and high interest rates are affecting the financial situation of many companies.
The information service provider expects 17,900 company insolvencies this year. That would be 22.8 percent more than in the previous year. "Despite the increase, we cannot speak of a wave of insolvencies," said Schlein. After extensive support programs worth billions, it is more a return to normality. In order to avert a wave of bankruptcies as a result of the pandemic, the state had also granted temporary exemptions from insolvency law.
Further increase in company bankruptcies expected in 2024
According to Crif, the number of company bankruptcies could rise to up to 20,000 cases in the coming year. This would still be less than the average of just under 26,200 insolvencies per year since 1999, compared to 39,320 in the previous record year of 2003.
According to Schlein, the majority of companies are still in a good financial position. However, the increasing number of major insolvencies could lead to further bankruptcies. "In some cases, domino effects will ensure that insolvent companies will drag other companies into insolvency with them."
According to Crif's estimates, more than 305,000 companies, or 10.1 percent, currently have an increased risk of insolvency. The credit agency examined the creditworthiness of almost three million companies. Among other things, information in the balance sheets, profit and loss statements, turnover, payment history and negative judicial features were evaluated.
- The economic situation, with its high energy costs, supply chain difficulties, geopolitical uncertainties, and persistent inflation, is placing considerable pressure on many companies, contributing to their debt levels.
- The predicted rise in production costs, personnel expenses, and interest rates further strains the financial situation of numerous companies, potentially leading to more bankruptcies.
- The company's increasing debts, coupled with the ongoing economic challenges, may increase the risk of insolvencies, potentially leading to a domino effect that drags other companies into financial distress.
Source: www.dpa.com
