Record-breaking surge in corporate bankruptcies over the past two decades - Record-breaking bankruptcy filings in the past two decades
Let's cut to the chase: the insolvencies of individuals and corporations in Germany have reached an all-time high in the last 20 years. According to the Institute for Economic Research Halle (IWH), there were 1,626 insolvencies in April this year - a 11% increase from the previous month and a staggering 21% compared to April 2020. And guess what? These numbers even surpassed the values from the 2008/2009 financial crisis. When was the last time we saw more insolvent individuals and corporations in Germany? Back in July 2005, buddy!
Why has the insolvency whirlwind swept through Germany this year? Well, that's where things get interesting. According to the IWH, part of the explanation is an unusually high number of smaller insolvency cases. If these small cases return to their long-term average, we might see a decrease in insolvency numbers in the coming months. But let's not delude ourselves; more business failures are on the horizon for Germany in the near future.
The IWH scrutinizes leading indicators that predict insolvencies by at least two to three months. They analyze insolvency announcements monthly and tie them to company balance sheet data.
But hey, you're not here just for the bare facts, right? So, let me spill the beans on some juicier insights. According to my sources, the main culprits behind this insolvency spike are a steep rise in energy costs, economic uncertainty, sky-high costs across multiple sectors, staff shortages, and shrinking profit margins. Don't take my word for it, though. The pandemic played a significant part in all this mess, disrupting business operations and financial health.
Moreover, Germany's new restructuring law, the Stabilization and Restructuring Act (StaRUG), was supposed to help manage financial distress. But, surprisingly, the overall insolvency numbers went through the roof, indicating that many businesses struggled to stabilize despite the new legal restructuring options. Certain sectors, such as construction, courier services, and gastronomy, were hit the hardest due to their sensitivity to cost escalations and labor shortages.
In short, the perfect storm of soaring energy prices, ongoing economic uncertainty, pandemic aftershocks, and cost pressures has resulted in a drastic increase in insolvencies in Germany this year - even surpassing the levels from the 2008/2009 financial crisis. Despite the new restructuring legislation, the economic climate has led to an increased number of bankruptcies. So buckle up, folks - the economic rollercoaster's ride ain't over yet!
- Insolvency
- Germany
- Business failure
- Institute for Economic Research Halle
- Economic uncertainty
- Energy prices
- COVID-19 pandemic
- Restructuring legislation
- Sectoral vulnerabilities
- Construction
- Courier services
- Gastronomy
- Stabilization and Restructuring Act (StaRUG)
- The Institute for Economic Research Halle (IWH) found an unusually high number of insolvency cases in Germany, which contributed to an all-time high in business failures over the past 20 years.
- Among the main factors causing the insolvency surge in Germany this year, according to the IWH, are economic uncertainty, a steep rise in energy costs, sky-high costs across multiple sectors, staff shortages, shrinking profit margins, and the impact of the COVID-19 pandemic.
- The IWH analyzes insolvency announcements monthly and ties them to company balance sheet data to scrutinize leading indicators that predict insolvencies by at least two to three months.
- Despite Germany's new restructuring law, the Stabilization and Restructuring Act (StaRUG), being meant to help manage financial distress, insolvency numbers have gone up significantly, especially in sectors like construction, courier services, and gastronomy, which are more vulnerable to cost escalations and labor shortages.
