Significant increase in the number of insolvencies worldwide
In 2022, the number of global company closures increased by just under eleven percent compared with the previous year. This means that the trend in insolvencies is once again pointing upwards, following a very small percentage increase in business closures in 2021 (plus 0.6 percent). The reasons for the rise in the number of insolvencies are complex, but have a common denominator in the gloomy economic and monetary environment. Switzerland was affected to an above-average extent.
As Dun & Bradstreet's Global Bankruptcy Report shows, the number of bankruptcies rose in around 60 percent of the 48 countries surveyed last year, with 14 countries recording an increase of more than 10 percent. In Europe, the countries hardest hit by the wave of bankruptcies were Austria, France and the United Kingdom - with an increase in bankruptcies of around 50 percent in each case. But Switzerland also saw a significant increase in business failures, with a rise of 27 percent to 7,751 cases, with the curve steepening toward the fourth quarter of 2022. The sharp rise in insolvencies in Switzerland is likely due, among other things, to the drop in demand in the customer markets of the Swiss export industry. However, a lack of hedging against rising raw material and energy prices may also have contributed to a higher susceptibility to bankruptcy, especially among small and medium-sized enterprises.
Fewer corporate bankruptcies in the USA
US companies proved to be more resilient. In the USA, insolvencies fell by two percent to 18,765 cases. Germany also recorded a comparatively small increase in insolvencies of around four percent (14,553 cases). This may have been partly due to the German government's decision to relax insolvency laws in the wake of the energy price shock. Secondly, as a result of the explosion in energy prices, companies and private households in Germany received greater relief than in other European countries. It is estimated that the volume of the measures amounted to around seven percent of German gross domestic product (GDP). By comparison, France spent only 3.7 percent of its GDP on corresponding relief.
Insolvencies on the rise worldwide for various reasons
The fact that insolvency cases increased noticeably last year overall - i.e., across all countries - is likely to have several causes. Firstly, the pandemic-related government support programs have come to an end in many countries. Secondly, the rapid rise in energy and raw material prices has pushed up operating costs overall. In addition, central banks have raised key interest rates to combat inflation. The turnaround in interest rates has in turn made corporate financing more difficult. Loans have not only become more expensive, but banks are also increasingly restrictive. Another point is the Russian invasion of Ukraine, which not only triggered the energy crisis but also led to sanctions-related restrictions.
No relaxation in sight
Looking at this challenging macroeconomic environment, the trend of rising insolvency figures is likely to continue this year. Key interest rate increases are known to influence the economy with a time lag. A further cooling of the global economy is therefore to be expected. Against this background, 2023 is likely to be characterized by economic stagnation and a correspondingly sober business climate. The Dun & Bradstreet report also expects a further increase in bankruptcies in Switzerland. The report cites a further weakening of export markets and a halt to the benefits granted during the COVID 19 pandemic as reasons for this.
Source: Dun & Bradstreet
