Steepest Rise in Business Bankruptcies Since October Observed - Significant surge in bankruptcy filings since October
Germany Experiences Sharpest Rise in Corporate Insolvencies Since October 2021
Germany has witnessed a significant increase in corporate insolvencies, with the highest jump recorded in July 2025. According to the Leibniz Institute for Economic Research Halle (IWH), the number of insolvencies rose by approximately 19.2% year-on-year, surpassing the previous high of October 2024 [1][3][4].
The total filings in July 2025 approached the highest levels seen in the last 20 years, only surpassed by the record in April 2025, signaling worsening economic distress [1]. The surge in insolvencies has shattered hopes for a quick economic recovery in Germany, marking the crisis as more severe than during the 2009 financial downturn [1][2].
Causes
This surge in insolvencies is driven by multiple overlapping factors. The prolonged economic recession since late 2021 has eroded company liquidity and financial stability [3][5]. High energy costs, particularly affecting energy-intensive sectors, continue to strain businesses [2][3]. Overregulation and high tax burdens increase operational costs and discourage investment [2].
The collapse in key sectors such as construction, where output fell 4% in 2024 and is projected to decline further by up to 3% in 2025, also contributes to the rise in insolvencies [2][5]. Declining manufacturing output and underutilization of production capacity, with manufacturing output down nearly 14% since 2017 and construction permits down ~50% since mid-2022, further exacerbate the situation [5].
Increasing non-performing loans (NPLs), indicating deteriorating credit quality, are another concern, with the ratio rising from 18.2% in Q4 2023 to 24.4% in Q4 2024, particularly affecting manufacturing [5].
Impact
The insolvency surge has impacted various industries, displacing companies and jobs, particularly in sectors like transport, logistics, construction, and hospitality which recorded the highest failures [3]. Personal bankruptcies have also risen significantly, by about 16.1% year-on-year in May 2025, reflecting broader economic hardship [3].
Total bankruptcies in 2024 reached the highest level since 2015 (~21,812 cases), and 2025 is forecasted to surpass that [1][2].
Future Projections
Forecasters expect bankruptcy cases to continue rising through 2025 and beyond, reflecting persistent structural weaknesses in the German economy despite government stimulus efforts [1][2]. The government's stimulus totaling €847 billion is seen as unlikely to resolve underlying challenges of competitiveness, regulation, and energy costs [2].
Rising non-performing loans and weakened sectors suggest continued financial strain in manufacturing and construction [5]. Unless corrective policies address regulation, energy costs, and structural reforms, insolvency rates are likely to remain elevated or worsen in the near term.
It is important to note that the exact number of insolvency cases that will be processed by the insolvency courts and included in the official statistics is uncertain. Additionally, the increase in insolvencies in July 2025 is more than the increase observed in July 2023. The decrease in insolvency numbers in May 2023 was a brief respite before the current surge.
Vocational training programs could be extensively implemented within the community to foster a skilled workforce, potentially bolstering the resilience of small and medium-sized businesses in the face of challenging economic conditions such as the current surge in corporate insolvencies. Financial support from the industry, coupled with government subsidies, might facilitate the expansion of vocational training initiatives, ensuring businesses have access to a competent workforce during these tough times.
In light of the escalating financial pressure on businesses and individuals due to the crisis, it would be prudent for the government to review and potentially adjust their community policy to account for increased support in vocational training, thereby promoting job security and stimulating economic recovery.
