Insolvencies in times of COVID-19 – update
In the summer of 2020 credit rating agencies projected that the number of insolvencies worldwide will rise. Creditreform predicted 15%-18% more company insolvencies for 2020 compared to 2019 with an even higher increase during the first two quarters of 2021. Euler Hermes expected a rise of insolvencies worldwide by 4% in 2020 and by 8% for 2021, in Germany – 17% and respectively 16%.
A year later, we know that 2020 the number of insolvencies decreased worldwide by 10% and in Germany by 15,5%. In the first quarter of 2021, we could also observe a decrease compared to the same period in 2020.
Most governments have used economic stimulus packages designed to mitigate the effect of the pandemic on the economy. In Germany, the government suspended the duty to file for an insolvency until the end of April of 2021. It also adopted multiple economic measures such as short time work and liquidity support („Überbrückungshilfen“).
Considering the current economic framework, the rating agency Euler Hermes adjusted its prognosis for Germany and now predicts a 6% increase of insolvencies in 2021 and 15% in 2022.
If the German government adopts further measures to support companies, a wave of insolvencies caused by the pandemic can be avoided.
The figures do not reflect the actual situation of the companies. In our opinion, the pressure to restructure/reorganize is overshadowed by political measures taken by the German government.
FAE Consulting GmbH has specialized in restructuring of companies. We support companies in process management and in developing and implementing strategies for restructuring. If you have specific questions, please contact us at any time at contact@fae-consulting.de. We will answer you promptly.
Sources:
Euler Hermes Deutschland: Insolvenzupdate (März 2021)
Statistisches Bundesamt (Destatis): 1. Quartal 2021: 19,7 % weniger Unternehmensinsolvenzen als im 1. Quartal 2020
Verband der Vereine Creditreform e. V.: Insolvenzen in Deutschland, 1. Halbjahr 2021
Verband der Vereine Creditreform e. V.: Insolvenzen in Deutschland, 1. Halbjahr 2020
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