It seems likely that the pre-epidemic figures will be exceeded in half of the countries for which Allianz Trade has analyzed the bankruptcy levels for 2023, and in three-fifths for 2024. In Europe, bankruptcies increased by 41 percent annually to 59 thousand in 2023, in the UK by 16 percent to 28 thousand 500, in Germany by 22 percent to 17 thousand 800 and in Italy with an increase of 24 percent. It is expected to reach 8900. In the USA, on the other hand, a 49 percent increase in bankruptcies is expected in 2023 as a result of tighter credit conditions and a significant economic slowdown.
Large-scale bankruptcies continue to rise
According to the report, although the majority of bankruptcies are small and medium-sized businesses, the trend is slowly starting to spread to large companies. This creates the risk of a domino effect. At the global level, the number of major bankruptcies reached 88 in the last quarter of 2022, slightly above pre-pandemic levels. The report also states that global growth is expected to slow down by 2.2 percent in 2023, and a moderate recovery is expected in 2024. However, according to the report, which stated that this recovery was below the levels that would trigger a decrease in bankruptcies, in addition to low growth, increasing pressure on profitability, weakening of cash buffers and tighter financing conditions may cause bankruptcies to increase again.
Number of bankruptcies slightly above pre-pandemic levels
Noting the domino effect in bankruptcies, Maxime Lemerle, Allianz Trade Principal Analyst for Bankruptcy Research, said: “For companies with revenues of more than 50 million euros, the number of bankruptcies is now slightly above pre-pandemic levels. Construction, retail and services sectors are most affected. Low growth. , pressure on profitability and tight financing conditions are testing the resilience of the most vulnerable companies, while the sectors with the least pricing power among these companies are those that are most exposed to wage-driven and interest rate hike costs, such as textiles, services, retail, transportation, construction and durable goods. On the other hand, Maxime Lemerle, who stated that the recent turbulence in the banking sector in Europe and the USA brought to mind the question of what kind of effect a possible liquidity crisis might have on bankruptcies, said: In the event of a reoccurrence, the number of bankruptcies in the US and Western Europe could increase by 21,600 and 99,900, respectively, in 2023 and 2024, respectively. Even a liquidity crisis of the magnitude seen during the bursting of the technology bubble in the early 2000s, not a major financial crisis, will lead to 12,900 and 95,300 additional bankruptcies in the same regions in 2023 and 2024, respectively. In a situation where loans are frozen and new loans are not given, there will be an increase of 10,700 and 46,300 in the number of bankruptcies in the USA and Europe, respectively,” he said.
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