Financial struggles lead to potential layoffs

Spiking Corporate Collapses: Creditreform Predicts a Tumultuous 2024

🏢 Frankfurt's Financial Frenzy

It's a grim forecast: Corporate insolvencies are set to skyrocket to around 22,400 cases in 2024, according to Creditreform. With data up to early November, the analysts project the rest of the year's figures, painting a picture of an economic storm on the horizon. This alarming figure represents a staggering 24% increase from the previous year.

📅 No Silver Lining in Sight

Patrik-Ludwig Hantzsch, head of Creditreform Economic Research, was straightforward at a Frankfurt press conference: "We anticipate this dynamic insolvency trend to continue at least into 2025." The specter of record-high insolvencies of 2009 and 2010, when over 32,000 corporate collapses were recorded annually, looms large.

💼 Larger Players Sinking

Contrary to popular belief, large businesses are no longer immune to bankruptcy. In fact, the proportion of insolvencies in businesses with more than 250 employees has soared significantly, a shift aptly demonstrated by the insolvencies of travel agency FTI and fashion retailer Esprit. Creditreform CEO Bernd Bütow warns of the dire consequences: "High claims losses and job losses."

💔 Jobs and Jeopardy

Creditreform predicts around 320,000 jobs to be at risk or lost due to insolvencies in 2024, a chilling increase from the 205,000 job losses in 2023 and the highest level in the past five years. In a grim twist, creditors of insolvent companies are projected to incur total damages of a whopping 56 billion euros in 2024.

🛠️ Industry Vulnerability

The uptick in insolvency numbers isn't limited to a single sector. Manufacturing, construction, retail, and services are all expected to see higher insolvency rates in 2024 than in the previous year. Creditreform encapsulated the situation succinctly: "Insolvency numbers rose in all sectors and exceeded pre-Corona levels." The services sector, in particular, saw a staggering 27% increase, while the construction industry held the highest insolvency rate.

🔓 Newbies bearing the Brunt

Young companies, those with less than two years in the business market, bore the heaviest burden in 2024, with a nearly 40% increase in insolvency cases compared to the previous year. Older companies, those with over ten years in business, also saw a shocking 20% increase in insolvency cases. Hantzsch summed up the situation bluntly: "In addition to weak economic growth, structural problems are exacerbating the situation." The vicious cycle of high costs (energy, labor), lack of investment, and economic uncertainty all contribute to this corporate chaos.

💰 Consumer Chaos on the Horizon

This tumultuous economic landscape is expected to seep into the consumer watch, with the number of consumer insolvencies increasing by around 8% in 2024, resulting in 72,100 new cases. The rising tide of job losses in the coming years is anticipated to further exacerbate this financial quagmire.

🔍 Digging Deeper: Why the Crisis?factor1: Rising inflation, putting pressure on businesses.factor2: Recessionary trends leading to reduced consumer spending and investment.factor3**: The withdrawal of pandemic-related financial support, leaving businesses without crucial lifelines.

These factors, among others, conspire to create a treacherous business environment, culminating in a significant surge in corporate insolvencies. In Austria, the construction and general business sectors are looking particularly volatile. In Germany, the construction, courier services, and gastronomy industries are buckling under the strain of rising costs, staff shortages, and shrinking margins.

The economic storm on the horizon, as predicted by Creditreform, is expected to result in a staggering 24% increase in corporate insolvencies, reaching around 22,400 cases in 2024.
Patrik-Ludwig Hantzsch, head of Creditreform Economic Research, projected that the increase in corporate insolvencies will continue at least into 2025, presenting a daunting picture of record-high insolvencies reminiscent of the years 2009 and 2010.
Large businesses are not immune to bankruptcy, as demonstrated by the insolvencies of companies like travel agency FTI and fashion retailer Esprit, highlighting the significant increase in insolvencies in businesses with more than 250 employees.
The dire consequences of these corporate collapses extend beyond the financial realm, with Creditreform predicting around 320,000 jobs to be at risk or lost in 2024, marking the highest level of job losses in the past five years.