Berlin - German businesses are facing a mounting wave of insolvencies, with Creditreform reporting a nearly 25% increase this year. The credit bureau warns that this trend is far from over, projecting record-breaking insolvency levels in 2025.
The surge is attributed to a confluence of factors, including soaring energy prices, a weakening economy, and the lingering effects of the COVID-19 pandemic.
"The crises of recent years are now hitting companies with a certain time lag in the form of insolvencies," explained Patrik-Ludwig Hantzsch, head of economic research at Creditreform. "This means that insolvency figures could soon be on a par with the record levels of 2009 and 2010, when over 32,000 companies went bankrupt."
By the end of 2024, Creditreform anticipates 22,400 companies declaring insolvency, a significant jump from the 17,814 cases recorded in 2023. This would mark the highest level since 2015, when 23,100 insolvencies were recorded.
Impact on the Economy
The economic consequences of this insolvency wave are substantial. Creditreform estimates that creditors have already incurred losses exceeding €56 billion ($58.7 billion) in 2024, a sharp increase from the €31.2 billion recorded in the previous year. Furthermore, an estimated 320,000 jobs are at risk or have already been lost due to corporate failures this year.
Contributing Factors
Energy Crisis: The sharp rise in energy costs has severely impacted many businesses, particularly energy-intensive industries.
Economic Slowdown: The German economy is facing a period of sluggish growth, with declining consumer confidence and weak industrial production.
Lingering Pandemic Effects: The COVID-19 pandemic continues to impact businesses, with supply chain disruptions and shifting consumer behavior creating ongoing challenges.
Investment Stagnation: Uncertain economic conditions are deterring businesses from investing, hindering growth and increasing vulnerability.
Sectors Most Affected
The service sector, particularly hospitality and gastronomy, has been significantly impacted by the rising insolvency rates. Retail and construction industries are also experiencing a high number of failures.
Impact on Smaller Businesses
While prominent companies like Galeria Karstadt Kaufhof, FTI Touristik, and Esprit Europe have made headlines with their insolvency filings, the majority of affected businesses are smaller enterprises with 10 employees or fewer, accounting for 81.4% of all insolvencies.
Outlook for 2025
Creditreform and Allianz Trade both predict a further increase in corporate bankruptcies in 2025. The ongoing economic weakness, particularly in Germany, is expected to continue to challenge businesses.
Conclusion
The surge in German insolvencies underscores the severe economic challenges facing the country. The combination of rising costs, weak economic growth, and lingering pandemic effects has created a perfect storm for many businesses. Unless conditions improve, 2025 is likely to witness a record number of corporate failures, with significant consequences for the German economy and the labor market.
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