Title: The Resurgence of Major Insolvencies in Germany's Economy
The German economy is currently witnessing a surge in major bankruptcies, according to a study by credit insurer Allianz Trade. Maxime Lemerle, an insolvency expert at Allianz Trade, noted that major insolvencies are on the rise and are projected to reach the 2020 peak level by the end of 2023. The fashion retail sector, hospitals, and mechanical engineering have seen a notable number of major insolvencies this year. Allianz Trade defines major insolvencies as bankruptcies of companies with an annual turnover exceeding 50 million euros.
The study suggests that Germany might hit a new insolvency record for major firms, with 45 cases in the first nine months of 2023. This figure marks a significant increase compared to the same period in 2022, when there were 26 major insolvencies, and 2021, which recorded 17 such cases. The highest level of insolvencies since 2016 was recorded in 2020, with 58 major insolvencies for the entire year and 44 cases in the first nine months.
Twelve large textile companies and fashion retailers have declared bankruptcy by September, along with six clinics, the study reveals. The construction industry has recorded the most insolvencies across all company sizes, followed by the trade and service sectors. The retail sector has shown a substantial increase in the number of major insolvencies compared to the previous year, while the hospitality industry was already facing weakness even before the VAT increase.
Milo Bogaerts, Head of Allianz Trade for the German-speaking region, predicts a challenging retail sector during the upcoming Christmas season. High food costs, despite the lower inflation rate, are forcing consumers to save on expenses such as dining out and clothing. This may result in fewer Christmas presents being bought, thereby negatively impacting retail businesses.
The financial situation of the health sector is a cause for concern, with many clinics currently experiencing financial difficulties. Germany's hospital sector may face additional challenges due to reduced government spending, increasing operational costs, and decreased consumer confidence.
The increase in major insolvencies in Germany is attributed to a multifaceted set of factors, including:
- Economic slowdown
- Rising interest rates
- Declining collateral values
- Trade policies and geopolitical tensions
- Structural weaknesses
- Specific sector-related issues
The retail sector, in particular, is currently grappling with challenges such as high energy costs, declining consumer confidence, and increased operational expenses. Meanwhile, the healthcare sector is likely to face challenges related to reduced government spending, increased operational costs, and decreased consumer confidence.
In conclusion, the economic downturn, structural weaknesses, and external factors are leading to a surge in major insolvencies in various sectors of Germany's economy. The retail sector, in particular, is facing significant distress, while the healthcare sector may also be impacted due to structural weaknesses and reduced government spending.
