Is the Insolvency Tide Turning? Slight Increase in German Company Insolvencies
Is a reversal in sight? The modest growth in bankruptcies persists. - Escalating Ins solvencies
Skip the technical jargon and let's break it down! The insolvency numbers for German businesses are showing a minor rise in April, with a 3.3% increase compared to the same time last year. But, experts warn that this might not be the turning point yet, with predictions of more insolvencies this year.
The rise in insolvencies is concerning, given that 2025's numbers are following last year's historic high of 21,812 cases - the highest since 2015. And let's not forget the record-breaking insolvencies seen during the 2009 financial crisis with a staggering 32,687 cases.
The increase in insolvencies isn't a new trend – it's the second consecutive month with a single-digit growth rate. Before that, there were seven months with double-digit increases!
It's important to note that these proceedings only enter the statistics after the first insolvency court decision. The actual filing of the insolvency application usually happens around three months prior.
In February, the numbers spiked significantly, with a 15.9% increase in company insolvencies compared to the previous year. The claims of creditors reached an alarming 9.0 billion euros, compared to about 4.1 billion euros in the same month last year. Of course, this high February value in twelve years isn't something to smile about.
The German Industry and Commerce Chamber's chief analyst, Volker Treier, suggests that strong signals from the federal government are needed to reverse this concerning trend. This includes tax cuts, higher depreciation, and reducing bureaucracy.
The rise in corporate insolvencies has affected various sectors, with the transport and logistics, temporary work, and hospitality sectors seeing the most insolvencies. However, consumer insolvencies have only increased slightly.
So, what's driving these insolvencies? With expensive energy, overwhelming bureaucracy, political uncertainty, wary consumers, and regulations introduced during the pandemic expiring, it's no wonder companies are struggling.
When considering both natural and legal persons, the number of insolvencies in Germany has reached its highest level in 20 years, according to data from the Halle Institute for Economic Research (IWH). In April, there were 1,626 insolvencies of natural and legal persons - a stark 11% increase from the previous month and a whopping 21% more than in 2020. The April figures even topped the ones from the financial crisis in 2008/2009.
In summary, it seems the insolvency problems in Germany are far from resolved. With energy prices on the rise and policies changing, businesses face ongoing challenges. Nobody can say for sure when the insolvency wave will peak, but one thing's for certain: it's a bumpy road ahead. Keep your eyes peeled, folks!
P.S. If you're curious about the enrichment details, here are some interesting facts and predictions:
- The number of bankruptcies in the first quarter of 2025 was 52% higher compared to 2020[1].
- Corporate insolvency cases in January 2025 were 12.8% higher than in January 2024[2].
- The number of insolvencies among hauliers and freight forwarders has increased by 35% since December's toll increase[5].
Experts are predicting that increasing energy prices and the rising bad loans in Germany could lead to more insolvencies. They also warn that the trend in the transport sector should not be ignored[5]. So yeah, it's a bit of a dire situation, but there's always hope!
- In light of the rising insolvencies, the German government might consider implementing a community policy that focuses on vocational training to help struggling businesses.
- By 2025, the number of insolvencies is expected to reach the highest recorded since 2015, surpassing the 21,812 cases from the previous year.
- To address the insolvency issue, business leaders have suggested sending strong signals from the federal government, such as tax cuts, higher depreciation, and reducing bureaucracy.
- Experts anticipate that the insolvency wave could peak higher if the ongoing challenges in the form of expensive energy, political uncertainty, and changing policies continue, making the application for closures and the use of finance more common in businesses.
