Data from Creditreform: number of corporate insolvencies is increasing again

Exploding energy prices, record inflation, consumers on the brakes on consumption: many companies fear for their existence.

Whether toilet paper producer (Hakle), shoe retailer (Görtz) or department store group (Galeria Karstadt Kaufhof).

Some well-known names can be found on the list of restructuring cases for 2022.

A wave of insolvencies has not yet been identified on the basis of officially recorded figures on corporate insolvencies extrapolated by experts.

However, the fact that there are more insolvent companies in Germany this year for the first time since the economic crisis of 2009 could be the start of a trend reversal.

It mainly affects small companies

According to estimates by the credit agency Creditreform, around 14,700 companies in Germany – mostly small companies with a maximum of ten employees – will have gone to the insolvency court by the end of the current year.

According to calculations by the credit agency, that would be around 4 percent more than in 2021.

"Persistent inflation, rising interest rates and energy costs, and an increasingly tough competitive situation are affecting the substance of many companies," explained the head of Creditreform's economic research, Patrik-Ludwig Hantzsch, when he presented the figures on Tuesday in Frankfurt.

"The lack of planning security and the difficult economic situation affect small and medium-sized companies in particular."

According to Creditreform calculations, 175,000 jobs will be lost in the current year as a result of insolvency in Germany.

The credit agency explained the significant increase compared to the previous year (141,000 jobs) with the fact that there were more large cases in 2022.

At the same time, the amount of damage fell from the record value of 51 billion euros in 2021 to 36 billion euros.

Like many other market observers, Creditreform also expects a further increase in corporate insolvencies next year: The increase from 2021 to 2022 is moderate, "but should only be the prelude to a further acceleration in insolvency activity".

The exemptions are no longer applicable

According to official figures, in 2021, which was still heavily influenced by the corona pandemic, there were 13,993 cases of bankruptcies in Germany, the lowest number since the current insolvency code was introduced in 1999. This is largely explained by exceptions: a wave of insolvencies as a result of the pandemic the state had temporarily suspended the obligation to file for insolvency in the event of over-indebtedness or insolvency.

There were later exceptions for companies that had suffered damage from heavy rain or flooding in the summer of 2021.

“The state aid measures have prevented an increase in the number of insolvencies in recent years.

What's more, they led to a paradoxical decrease in cases," analyzed Creditreform.

"The energy crisis could ensure that the numbers return to normal."

Other experts also expect rising bankruptcy figures.

In an analysis published in mid-November, the information service provider Crif assumed that more than 300,000 companies in Germany are currently having financial problems.

Since March 2022, the number of candidates has increased by 15.6 percent.

Further cushioning measures may be necessary

In a study in October, the credit insurer Allianz Trade estimated that government support measures in Germany had saved 2,600 companies from bankruptcy.

"Should the energy crisis worsen and the recession turn out to be worse than previously expected, the current measures to cushion a wave of bankruptcies will not be sufficient and there could be a significant increase in insolvencies," warned Allianz Trade.

After all, despite all the problems, the German economy has so far held up better than economists had expected.

In the third quarter, economic output increased by 0.4 percent compared to the previous quarter.

Because, as in the Corona pandemic, the state is spending billions to relieve the burden on citizens and companies, and the gas storage facilities are now full, the long gloomy forecasts have brightened.

"The recession is losing its horror," recently stated Dekabank chief economist Ulrich Kater.

A wave of bankruptcies has not materialized so far

This also reduces the pressure on potential insolvency candidates.

"So far, the insolvency figures have been developing more cautiously than many expected," summarized IWH researcher Steffen Müller in the latest insolvency trend from the Leibniz Institute for Economic Research in Halle.

The wave of bankruptcies has not materialized so far.

The professional association of insolvency administrators and administrators in Germany (VID) takes a similar view: "The moderate increase in the number of corporate insolvencies applied for in recent months is not yet an indicator of a long-term strong increase in insolvencies," explained VID chairman Christoph Niering earlier this week.

"In the long-term average, it is not an unusual increase at the end of the year."

Creditreform also emphasizes: In a historical comparison, the current number of corporate insolvencies in Germany is still "at a very low level" despite the increase.

For comparison: In 2009 there were almost 33,000 company bankruptcies.