Struggling Economy Rushes Bremen Towards Germany's Top Insolvency Spot
Is Bremen about to dethrone Berlin as Germany's insolvency king? According to a report by Creditreform, the beloved coastal city might just edge past Berlin in bankruptcy rates this year. Presented in Frankfurt on Monday, the report puts Bremen in the lead with an astounding 120 insolvencies per 10,000 companies, double the national average.
The smallest state by size has certainly made its mark on Germany's economic landscape. The demise of Convivo, a care home operator, is a prime example, filing for bankruptcy in January this year. Fortunately, most of its 77 care homes across various regions were resurrected by new operators. Some 5,000 Convivo employees managed to keep their jobs due to this turn of events.
Back in Lower Saxony, Reno, the renowned shoe retail chain, fell victim to bankruptcy at the start of March. A proportional sixth of its nationwide outlets landed in the hands of Kienast, a Wedemark competitor. With a new lease of life, Kienast is continuing to operate the stores under their original names. The brand joins an extensive list of shoe retail chains Kienast already manages, such as ABC Schuh-Center and Street Shoes.
Creditreform's report traditionally sees the city-states reigning supreme among the larger states. Bremen and Berlin share the top spot with 103 insolvencies per 10,000 companies, while Hamburg follows closely behind with 81. Thuringia records the lowest insolvency rate, setting the bar at 40 per 10,000 companies.
The experts at Creditreform point out that industry structures and the age of companies contribute to these regional disparities. Having said that, the overall insolvency numbers in Germany climbed significantly in 2023. Creditreform's estimates indicate a total of 18,100 bankruptcies by year's end, marking a 23.5% increase compared to 2022.
Suppose we dig a little deep into those numbers. In 2022, Bremen boasted only 72 insolvencies per 10,000 companies, but this figure has notably risen to 120 in 2023. In contrast, Lower Saxony saw a slight dip from 45 insolvencies to 42.
High energy prices and interest rate hikes have been blamed for the recent wave of bankruptcies. Patrik-Ludwig Hantzsch, Creditreform Economic Research's Head, stated in Frankfurt that these trends would continue through the coming months. A return to normality is estimated to occur once the special effects of the pandemic have tapered off, with insolvency numbers leveling out around November.
The German crisis agency isn't alone in its warnings. The International Monetary Fund (IMF) has also raised concerns about Germany's economic health, urging swift reforms for more inclusive growth.
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[1] Source: Statista, 2022.
[4] Source: International Monetary Fund, 2023.
