Economic Struggles in Bremen: Highest Insolvency Rate in Germany
Battling a struggling economy, skyrocketing energy costs, and elevated interest rates, Bremen, Germany's smallest federal state, is expected to claim the infamous title of the highest insolvency rate among its 16 counterparts this year. The credit agency Creditreform predicts around 120 insolvencies per 10,000 companies in Bremen, surpassing Berlin, which currently holds the position.
This intimidating figure is more than twice the national average of 60 insolvencies per 10,000 companies. Lower Saxony occupies the tenth place with an insolvency rate of 52 per 10,000 companies, as highlighted in the Creditreform's "Insolvencies in Germany" report presented in Frankfurt.
Unfortunately, Bremen's recent history is marked by prominent examples of companies filing for insolvency. Convivo, the care home operator, was forced into this unfortunate predicament in January 2023. Most of its 77 care homes scattered throughout various federated states continued operation under the guidance of new managers. Approximately 5,000 Convivo employees were salvaged by the new operators.
Osnabrück, a city in Lower Saxony, has also suffered from corporate insolvencies. The shoe retail chain, Reno, succumbed to financial difficulties at the beginning of March. Kienast, a competitor based in Wedemark, took over around 16% of Reno's outlets and continues operating them under their original names. Kienast is already synonymous with various shoe retail chains, including ABC Schuh-Center, K+K Schuh-Center, and Street Shoes.
City-states have always been at the forefront of the insolvency rate amongst the 16 federal states, with Bremen and Berlin holding the top spots until now with 103 and 81 insolvencies per 10,000 companies respectively. Thuringia has the lowest insolvency rate this year with 40 insolvencies per 10,000 companies, citing differences in industry structures and age of companies as underlying causes for these regional disparities.
The financial woes have not spared other regions in Germany. In 2023, Creditreform anticipates nearly 18,100 companies to fall into insolvency nationwide. This would represent a 23.5% increase compared to the previous year, with Bremen experiencing a particularly significant jump from 72 to 116 insolvencies per 10,000 companies.
"Ever-increasing energy costs and the interest rate turnaround have pushed more and more companies to the breaking point," explained Patrik-Ludwig Hantzsch, Head of Creditreform Economic Research, at the presentation of the credit report in Frankfurt. The experts at Creditream believe the number of insolvencies will continue to rise further in the near future.
The drop in insolvency figures after the 2009 economic crisis was primarily due to temporary relief measures provided by the state to prevent a wave of bankruptcies following the pandemic. However, insolvency figures started to climb upwards again in 2022, signaling the necessity for companies to adapt and navigate through the present economic realities.
To counter these challenges, Creditreform advises companies to proactively monitor their financial situations and seek assistance from credit reference agencies like themselves. Regional authorities and industry bodies in Bremen and Lower Saxony have also started conversations to develop strategies that could promote economic growth and financial stability. Companies in desperate need of investment or restructuring opportunities may also explore the possibilities offered by Frankfurt's stock exchange.
By navigating these challenging economic circumstances, companies can thrive and bounce back from the difficulties facing them.
