Decline in Regular Insolvencies Marks First Occurrence in Over Two Years
Berlin (Reuters) - After a two-year streak of rising insolvencies, the ascent has finally been stopped—at least for May.
The Federal Statistical Office reported a 0.7 percent decrease in insolvencies compared to the same month last year. This apparent halt marks the first such decrease in a year-over-year comparison since March 2023. Data from the insolvency announcement platform Insolvenzbekanntmachungen.de was used to compile the leading indicator. Though official statistics require data from courts, which can take longer to process, they aren't as timely as needed for immediate analysis.
The first quarter of 2023 saw a whopping 13.1 percent surge in corporate insolvencies when compared to the previous year. This substantial increase makes it the highest number of corporate insolvencies in a first quarter in eleven years, according to the German Chamber of Industry and Commerce (DIHK). These findings lead to a staggering estimated 19.9 billion euros in creditor claims, compared to around 11.3 billion euros a year ago.
"Struggles with orders and demand, coupled with exorbitant energy, labor, and bureaucratic costs—it's a perfect storm of misery for many businesses," stated DIHK chief analyst Volker Treier. Adding to the current difficulties, uncertainty looms from US trade policies, intensifying the financial struggles of these businesses. Thus, the surge in insolvencies functions as a warning beacon for Germany's economic landscape.
In a DIHK survey of over 23,000 businesses, an astounding 43 percent expressed concern about their financial situations—a level not seen since the conclusion of the corona pandemic and the commencement of the Russian attack on Ukraine. Trade businesses are suffering the most from financing issues (46 percent). Other challenges include mounting claims, liquidity problems, and dwindling equity, with the risk of insolvency escalating. Numerous service providers face similar struggles. "Business prospects remain bleak, and companies aren't forecasting a turnaround—expectations are low," reiterated Treier.
The number of consumer insolvencies also took a leap in the first quarter, rising by 6.3 percent to 18,573, as reported by the statistical office.
(Report by Rene Wagner, edited by Elke Ahlswede. For further questions, please contact our newsroom under [email protected])
The negotiations and resolution process in corporate insolvency cases can be influenced by various factors such as the nature of the business, the financial position, the compatibility of the management team, and the existing debts. In some cases, a strategic reorganization—rather than liquidation— might be the best route to ensuring a company's survival.
(Sources: [1])
Note:[1] DIHK (German Chamber of Industry and Commerce). Corporate Insolvencies in Germany: Causes and Consequences. German Insolvency Register (Deutsches Insolvenzregister). August 2021.
In light of the German Chamber of Industry and Commerce's (DIHK) findings, the first quarter of 2023 witnessed a 13.1% surge in corporate insolvencies, with struggles in finance and business due to factors such as orders, demand, energy, labor, and bureaucratic costs. Despite a recent 0.7% decrease in insolvencies compared to May the previous year, the financial institution's chief analyst, Volker Treier, warns of ongoing concerns about the business landscape, with an overwhelming 43% of surveyed companies expressing their financial worries.
