Soaring Insolvencies in Germany: A Growing Crisis
Germany’s corporate insolvency rate has witnessed a significant spike, reaching 14.1% above its previous year’s value, according to preliminary data from the Federal Statistical Office. Since June 2023, these numbers have consistently escalated in double-digit percentages, excluding June 2024.
The widening economic crisis is taking a heavy toll on businesses, leading to a surge in bankruptcies. In November 2023, a record number of 1,787 insolvencies were reported by district courts, an alarming 18.1% increase compared to the same month the year before.
Volker Treier, Chief Analyst of the German Chamber of Industry and Commerce (DIHK), expressed concern over the grim situation. Industries such as warehousing, construction, and hospitality have been particularly hard-hit. In the automotive sector, almost a quarter of companies are facing payment difficulties. A DIHK business survey involving 23,000 firms revealed that healthcare and social services are also experiencing severe distress.
Treier anticipates further escalation of the insolvency wave in the coming year. He urged policymakers to take decisive action, reduce bureaucracy, and lower business costs to swiftly guide the economy out of the crisis with favorable competitive conditions.
Surge in November
The latest data confirms that the insolvency crisis intensified in November 2023. With 1,787 insolvencies, the month marked the highest November figure in a decade. This represented an alarming 18.1% increase compared to November 2022.
Sector-Specific Impacts
The economic crisis has impacted various sectors differently. Companies in warehousing, construction, and hospitality have been particularly vulnerable to the downturn. Treier emphasized that the warehousing sector has been hit hardest, with a substantial increase in insolvencies.
The automotive industry is also grappling with significant challenges. The DIHK survey revealed that nearly a quarter of automotive companies are struggling with payment issues. This poses a considerable threat to the sector’s stability and employment levels.
Healthcare and Social Services Under Strain
The DIHK survey also highlighted the plight of healthcare and social services. A significant number of providers in these sectors reported financial difficulties, indicating the widespread impact of the economic crisis.
Policy Recommendations
In light of the worsening insolvency crisis, Treier called on policymakers to implement proactive measures. He emphasized the need for bureaucracy reduction, cost relief for businesses, and the creation of competitive framework conditions that foster economic recovery.
Outlook
Treier expressed pessimism about the immediate future, predicting that the insolvency wave will continue to swell in 2024. He cautioned that the economic crisis is far from over and that businesses will require continued support from policymakers to navigate these challenging times.
