Insolvencies among companies in Germany have reached record levels, with one sector being particularly hard hit.
Amid the economic downturn, the number of corporate insolvencies in Germany has climbed to its highest level in around ten years, according to a study. In July, 1,406 insolvencies of partnerships and corporations were recorded, the Halle Institute for Economic Research (IWH) reported on Thursday. This represents a 20% increase from the previous month and a 37% rise compared to the same period last year. The current figure is also 46% higher than the July average for the years 2016 to 2019, the pre-pandemic period.
“The significant increase in insolvency numbers affects all sectors,” the IWH emphasized. “However, it is particularly pronounced in the manufacturing sector.” After 100 industrial companies declared insolvency in June—matching the average of the past twelve months—the number has now risen to 145, setting a new high since sector data began being tracked by the IWH Insolvency Trend in January 2020. “Berlin, Hesse, and North Rhine-Westphalia were particularly hard hit,” the report noted.
According to the IWH analysis, nearly 10,000 jobs are at risk in the largest 10% of companies that filed for insolvency in July. “The closure of large employers can lead to significant and long-term income and wage losses for affected employees,” the institute warned. Steffen Müller, a professor at the University of Magdeburg and insolvency researcher at IWH, told the newspaper t-online: “The total number of jobs affected is significant,” indicating that many large companies are currently impacted.
“Large companies rarely resort to insolvency because they can typically restructure without going through the process,” Müller explained. “However, in crises, such restructuring plans often fail. As a result, we are currently seeing a concentration of insolvencies among well-known names.”
Economic stagnation persists
Looking ahead, experts expect a mixed development. “We anticipate that insolvency numbers will slightly decrease in August and then rise again in September,” Müller said. This suggests that the number of insolvencies will likely remain consistently above pre-pandemic levels.
The German economy is currently in a prolonged slump. Although the gross domestic product grew by 0.2% in the first quarter, it contracted by 0.1% in the spring, driven by reduced investment in machinery, equipment, and buildings. Many experts predict a lackluster recovery in the second half of the year, as large parts of the economy continue to suffer from a lack of orders.
