Skip to content

Business failures in Western Europe see another rise

Sharply increased count of corporate bankruptcies observed in Western Europe once more

Shipping Vessel in Hamburg Port
Shipping Vessel in Hamburg Port

Soaring Company Insolvencies Pile Pressure on Western Europe

Significant rise observed in Western European business bankruptcies - Business failures in Western Europe see another rise

In a troubling turn, Patrik-Ludwig Hantzsch, the head of Creditreform Economic Research, points out that the economic hardship stretching over three years has battered Europe, and not just Germany. Crippling competition has led to an alarming surge in company insolvencies across Western Europe. Hantzsch asserts these insolvencies are not merely catch-up effects from the COVID-19 pandemic.

The specter of insolvencies looms over 15 out of 17 Western European countries assessed, with only Denmark and the UK experiencing a decrease. Strikingly, the rise in insolvencies has been most dramatic in Ireland, Greece, and the Netherlands. Germany, for instance, witnessed a 22.5% jump, while France registered a 17.4% increase.

The construction industry is hit hardest by this wave of insolvencies, registering a 15.4% spike. The credit agency explains that the industry grapples with escalating construction costs, high financing costs, and waning demand, all of which intensify the economic squeeze [1].

Insolvency numbers among businesses also rise in most Central and Eastern European countries, according to the report. Notably, many Eastern European countries are on the rise, including Poland, Latvia, Slovenia, Lithuania, and Estonia. However, the sharp decrease in Hungary, with a notably high rise in 2022 and 2023, offsets the overall picture [2].

In the United States, the number of corporate insolvencies escalated by 16.6%. Despite moderate economic growth, high interest rates and dwindling consumer spending continue to plague companies. However, these figures remain moderated compared to pre-COVID levels of 2018 and 2019 [2].

Key Factors Contributing to Insolvencies in Western Europe:

  1. Economic Hardships and Financial Strain
  2. Struggling global economy and inflation have increased financial strain for businesses across Europe.
  3. Rising interest rates have heightened borrowing costs, making it harder for debts to be managed and businesses to operate efficiently.
  4. Supply Chain Disruptions and Cost Escalations
  5. The aftermath of the pandemic and ongoing global events have caused significant supply chain disruptions, resulting in escalating costs and uncertainties for businesses.
  6. High energy costs and volatile prices have been particularly challenging for energy-intensive or raw materials-reliant industries.
  7. Regulatory and Market Challenges
  8. Economic changes and regulatory complications arising from Brexit and other events have added to the uncertainty, impacting trade and investment decisions in close economic partners like Ireland and the Netherlands.
  9. Regulatory modifications and associated expenses can stretch smaller businesses, fuelling increased insolvency rates.
  10. Cash Flow Issues and Funding Accessibility
  11. Tight Credit conditions and reduced access to capital due to banking regulations and market turmoil can limit companies' ability to secure necessary funding, especially during economically tumultuous times.
  12. Smaller businesses are often hit the hardest during these periods of financial strain.
  13. Global Insolvency Trends
  14. Global business insolvencies are projected to climb by 7% in 2025, reflecting a broader economic struggle that weighs heavily on Western Europe.
  15. The increase in company insolvencies in Western Europe is not solely attributable to the COVID-19 pandemic, as revealed by Patrik-Ludwig Hantzsch, the head of Creditreform Economic Research.
  16. Denmark and the UK are the only two Western European countries to have experienced a decrease in company insolvencies, while the rise has been most dramatic in Ireland, Greece, and the Netherlands.
  17. The construction industry has been hit hardest by this wave of insolvencies, with a 15.4% spike, due to escalating construction costs, high financing costs, and waning demand.
  18. The specter of insolvencies also looms over Central and Eastern European countries, with Poland, Latvia, Slovenia, Lithuania, and Estonia among those experiencing an increase, although Hungary has seen a sharp decrease with a rise expected in 2022 and 2023.

Read also:

    Latest