Soaring Business Insolvencies Across Western Europe: A Glimpse at the Economic Landscape
The Current State of Affairs
Western European businesses declare more bankruptcies in notable surge - Business failures in Western Europe experience an uptick once more
The Western European business landscape is grappling with a surge in the number of insolvencies. Patrik-Ludwig Hantzsch, head of Creditreform Economic Research, has revealed that this trend isn't just a catch-up from the COVID-19 pandemic but a direct result of intensified competition and economic challenges.
To put it into perspective, the analysis reveals that 15 out of 17 Western European countries saw an increase in insolvencies. Despite downturns, only Denmark and the UK experienced a decrease in insolvencies. While individual nations like Ireland, Greece, and the Netherlands are particularly hard-hit, countries like Germany and France have also recorded notable increases of 22.5% and 17.4% respectively.
The hardest-hit sector appears to be the construction industry, with a 15.4% rise in insolvencies due to soaring costs, mounting financing expenses, and slumping demand.
Peering into Central and Eastern Europe
The disheartening trend isn't confined to Western Europe alone. Many Central and Eastern European countries have also witnessed an increase in corporate insolvencies, especially Poland, Latvia, Slovenia, Lithuania, and Estonia. However, Hungary, which had witnessed a significant hike in 2022 and 2023, has lately demonstrated a noticeable decline.
The American Context
The United States isn't entirely immune to this as well. The country has recorded an increase of 16.6% in insolvencies. Despite moderate economic growth and being below pre-pandemic levels, high interest rates and reduced consumer spending continue to burden American companies.
Some Key Insights
- Hospitality Sector: Despite a 11% decrease in insolvencies, the sector continues to bear a historically high number when compared to pre-pandemic levels.
- Germany's Sectors: Construction, courier services, and gastronomy face significant stress due to increased costs, labor shortages, and narrowing margins. The outlook suggests that up to 26,000 insolvencies are likely in 2025, marking a new peak since 2015.
- Spanish and Italian Economies: Leading growth among Eurozone countries, with robust performances in early 2025.
- French Economy: Stagnation and political unrest continue to mar the French economy, reflected in eight consecutive months of contraction in the composite PMI.
- UK Hospitality Sector: Despite some improvement, insolvencies in the sector remain significantly higher than pre-pandemic levels, indicative of a "new normal".
Navigating the Economic and Geopolitical Maze
- Economic Challenges: High costs and consumer restraint significantly contribute to raising insolvency rates across Western Europe.
- Trade: Anticipated tariff hikes, particularly affecting trade with the US, pose ongoing challenges for European exporters.
- Inflation and Policy Rates: Cooling inflation may lead to policy rate adjustments by the ECB to boost growth.
In Conclusion
The spike in business insolvencies across Western Europe underscores the broader economic pressures confronting the region. While growth is evident in some nations like Spain and Italy, others like France languish in economic stagnation. The hospitality sector, despite some improvement, continues to encounter significant challenges. The region is currently navigating a period of heightened insolvency risks.
- The surge in insolvencies across EC countries, as revealed by Patrik-Ludwig Hantzsch of Creditreform Economic Research, is not solely a catch-up from the COVID-19 pandemic but a direct result of intensified competition and economic challenges.
- According to the analysis, Denmark and the UK are the only two EC countries that have seen a decrease in insolvencies, while countries like Germany and France have recorded notable increases of 22.5% and 17.4% respectively.
- The hardest-hit sector in these EC countries seems to be the construction industry, with a 15.4% rise in insolvencies due to soaring costs, mounting financing expenses, and slumping demand.
- Moreover, the trend isn't confined to Western Europe alone as many Central and Eastern European countries have also witnessed an increase in corporate insolvencies, especially Poland, Latvia, Slovenia, Lithuania, and Estonia.
