Globally, the number of bankruptcies dropped by 29% last year compared to the period before the corona crisis. However, major differences can be seen between countries, and according to Atradius this can mainly be explained by aid that has or has not been granted. For example, in countries with extensive support packages such as the Netherlands (-41%), Portugal (-57%), New Zealand (-32%) and the United States (-34%) a strong decrease in the number of bankruptcies is visible, while countries as Spain (+42%), the Czech Republic (+21%) and Italy (+19%) were confronted with an increase in the number of company closures. Here the economic recovery was relatively weak or government support was phased out at an earlier stage.
Signals
“All signals point to a reversal in insolvency levels globally, as government support ends in most countries after the first half of 2022. As a result, the number of bankruptcies in 2022 and 2023 is likely to return to pre-corona levels and ‘zombie companies’ will still go bankrupt,” says Theo Smid, senior economist at Atradius Netherlands. “In addition, inflation is rising worldwide, which affects the purchasing power of consumers, and therefore also poses a risk for companies.”
For the Netherlands, Atradius expects an increase in the number of bankruptcies of 101% in 2022 and 19% in 2023. This means that the expected insolvency level at the end of 2023 (5,100) is still significantly lower than the previous peak in 2013 (12,500). Smid: “The cessation of government support is the main cause of the sharp increase in the number of bankruptcies in the Netherlands. At the same time, the economy is slowing down as a result of inflation and high energy and commodity prices. Although consumer spending is still fairly stable due to catch-up demand after corona, consumer confidence has fallen sharply and purchasing power is expected to fall sharply in the second half of this year. This will further deteriorate the prospects for Dutch companies.”
Increase
Other countries with a relatively strong increase in the number of bankruptcies are Portugal (+124%), Singapore (+88%), Belgium (+83%), Austria (+75%) and the United States (+70%). Bankruptcies rose relatively less sharply in the Czech Republic (+5%), Finland (+24%), Switzerland (+35%) and Romania (+16%), because they were previously faced with the phasing out of support measures. In New Zealand (-19%) and Hong Kong (-15%), Atradius even expects a decrease in the number of bankruptcies in 2022, as government support here will be extended until the end of the year.