Corporate Insolvencies: Slowdown but Still a Concern
Corporate insolvencies witnessing a surge, slowing momentum.
Hey there! Let's talk about corporate insolvencies in Germany. April saw a slight increase, with a 3.3% rise year-on-year, as reported by the Federal Statistical Office in Wiesbaden. This marks the second consecutive month with single-digit growth, following a period since summer 2024 where the number always spiked double digits. But wait, don't breathe a sigh of relief just yet! The German Chamber of Industry and Commerce (DIHK) warns that the trend isn't looking rosy.
The details of insolvencies don't become official until a court makes a decision on the application. In reality, insolvency applications often occur around three months before the court's decision is made public.
In February, the situation was grim. According to local courts, a whopping 2,068 regular insolvencies were filed, marking a staggering 15.9% increase from the previous year. This equated to an eye-watering €9 billion in creditor claims, compared to €4.1 billion in the previous year. The transport and warehousing sector, as well as other services and the hotel and restaurant industry, saw the most insolvencies.
Volker Treier, the DIHK's chief analyst, explained that the February value was the highest in twelve years, and blamed factors such as sluggish demand both domestically and abroad, high uncertainties due to US trade policy, and burdens on the domestic location due to taxes, energy costs, and bureaucracy. Yikes!
So, while we're seeing a slowdown in the growth rate, it's worth remembering that these financial struggles are far from over for many German companies. Stay tuned for more updates!
[1] German Federal Statistical Office: Statistisches Bundesamt[2] Mergermarket: Deutschland/Germany M&A Deals in 2024[3] Bundesbank: German GDP Decline in 2024[4] DIHK: Investment Climate in Germany Report 2024
[1] Despite a recent slowdown in the growth rate of corporate insolvencies in Germany, these financial struggles are not yet over for many companies, as only a 3.3% increase was seen in April compared to the previous year, and the trend doesn't seem promising according to the German Chamber of Industry and Commerce.
[2] Insolvency statistics for businesses in Germany can be misleading, as insolvency applications aren't officially recognized until a court decision is made, often occurring around three months after the application has been filed.
[3] In fact, February 2024 saw a significant surge of regular insolvencies, with a staggering 15.9% increase year-on-year, amounting to €9 billion in creditor claims, thereby highlighting the increasing interest in insolvency-related matters.
[4] The rise in corporate insolvencies in Germany can be attributed to several factors, including sluggish demand both domestically and abroad, high uncertainties due to US trade policy, and burdens on the domestic location due to taxes, energy costs, and bureaucracy—all aspects that warn of potential insolvency and bankruptcy threats in the future.
