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In 2022, some 42,500 French businesses shut up shop, accounting for an almost 50% insolvency increase compared to 2021, according to a report by data analytics consultancy Altares.
Read the original French article here.
This represents a 49.9% increase compared to 2021 – a record figure that results from poor economic recovery since the start of the COVID-19 pandemic.
Insolvency numbers fell sharply between March 2020 and November 2021 as businesses heavily relied on government support programmes. As the cash tap runs dry and businesses have to start repaying state-backed loans, the number of insolvencies is going up again – and though 2022 numbers remain below those of 2019, the speed at which they are recorded is significant.
Most worrying for SMEs
Generally, insolvencies have hurt the smallest businesses the most. Across Europe, 80% of all bankruptcies (1.6 million) in 2021 involved one-person companies, according to the European Commission – and the same is true of France.
Yet Altares’ data shows the situation is becoming increasingly worrying larger SMEs with 10-99 employees.
“3,214 SME insolvencies were recorded in 2022 compared to 1,804 in 2021, a surge of +78% over one year’, the report reads. A third of these insolvencies occurred in the last three months of 2022, representing a 93% increase.
“When SMEs fall, it is the whole local economic network that is impacted,” Thierry Millon, who directed the study, told EURACTIV France.
“They can no longer pay their suppliers, and the job loss is much greater across the value chain,” he said. What’s of particular concern to him is that some of these SMEs were economically sound to start with before they were forced to unwind.
Soaring energy bills, low economic growth and the numerous financial constraints imposed by the repayment of state-guaranteed loans all contribute to this trend.
The “whatever it takes” era coined by President Emmanuel Macron to help companies by any means possible during the pandemic is also over.
“All the factors are there to make the first quarter of 2023 very uncomfortable for many companies,” said Millon, warning that pre-COID insolency numbers may be reached much quicker than anticipated.
Sector and Europe-wide increases
Insolvencies are affecting all sectors, with the construction sector accounting for a quarter of bankruptcies, with 10,000 closures, the Altares report states.
The same is true in retail, where the number of businesses, especially the smallest ones, are quickly falling. As for services, they show a more contained increase of 32.3% compared to 2021.
The number of insolvencies will keep increasing in 2023, as the report forecasts 55,000 bankruptcies for that year, a figure close to the 55,400 recorded business failures of 2017.
An increase in insolvencies is also being registered in other parts of Europe.
While 100,000 companies are at risk of bankruptcy in Italy, according to the October 2022 figures of the Osservatorio Rischio Imprese published by market research firm Cerved, requests for the temporary suspension of operations have increased by 39.4% in Poland in the past year.
Meanwhile, “more than one in ten UK businesses reported a moderate to severe risk of insolvency in August 2022”, according to a note from the Office for National Statistics.
[Edited by Alice Taylor]
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