Corporate Insolvencies, 1st Half 2013

Following three years of a decreasing number of cases the number of corporate insolvencies has increased slightly in the first half of 2013. From January to June 15,349 companies became insolvent in Germany – 1.8 per cent more than in the comparable period of the previous year. These figures are included in the current survey on “Corporate Insolvencies, 1st Half 2013” published by the financial information agency Bürgel.

Bürgel’s Executive Manager, Dr. Norbert Sellin, places responsibility for the first increase in the number of insolvencies since 2009 “primarily on the after-effects of the weak economy in the last quarter of 2012”. Seen over the year as a whole there will be little change in this new trend. While Bürgel expects fewer cases of insolvency in the second half of 2013 the agency still forecasts up to 30,500 corporate bankruptcies for the entire year. This would represent an increase of just under three per cent, or 900 cases, over 2012. Dr. Sellin argues that the current Bürgel forecast is not in contradiction to an improved economic forecast: “Economic forecasts reflect expectations of the future. Insolvency statistics in contrast are an expression of the past,” explains Bürgel’s Executive Manager.

The industrial sector in particular has recorded more corporate bankruptcies, as has the service sector – hardest hit have been mechanical engineering; the printing industry; textiles and freight forwarding and logistics companies. “Given the lasting poor sales outlook companies are holding back with expenditure. Sustained uncertainty as regards the crisis in the euro zone has also put the brakes on any prior willingness to invest,” summarizes Dr. Sellin. Export companies in particular are suffering from the sluggish global economy. In addition to this, the long winter proved fatal to many companies in the first quarter of 2013. Taken overall these factors have resulted in a slight increase in losses for creditors. During the survey period these losses totalled just under 16.3 billion euros, representing an increase of 1.6 per cent.

A large number of the corporate insolvencies were recorded in the federal states of North Rhine-Westphalia (5,777), Bavaria (1,751), Baden-Württemberg (1,240) and Lower Saxony (1,209). A more informative picture emerges from the so-called insolvency rate – the number of corporate insolvencies per 10,000 companies in a federal state. Viewed in these terms North Rhine-Westphalia again heads the insolvency statistics with 79 corporate insolvencies per 10,000 companies. Saxony-Anhalt (61 cases per 10,000 companies), Saxony (54), Schleswig-Holstein, Lower Saxony and Bremen (53 each) and Berlin (51) also rank above the national average of 49 insolvent companies per 10,000 companies. Hamburg (48 insolvencies per 10,000 companies) and Saarland (47) were slightly below the national average. The lowest number of corporate insolvencies in the first half of 2013 were recorded in Bavaria, with 33 bankruptcies per 10,000 companies; Baden-Württemberg (35) and Brandenburg (39).

Insolvency proceedings per Federal State

Even if the insolvency statistics in some federal states have only increased slightly, it remains a fact that the number of cases of corporate insolvencies has increased in 12 of the 16 states – particularly in Thuringia with 6.3 per cent more corporate insolvencies. During the survey period more companies have also been hit by bankruptcy in Baden-Württemberg (plus 6.2 per cent) and Hesse (plus 5.9 per cent). In contrast, fewer cases were reported in Saarland (minus 6.0 per cent), Bremen (minus 1.8 per cent), Bavaria and Schleswig-Holstein (both minus 1.0 per cent).

Percentaged change in corporate insolvencies

Industrial enterprises (Gewerbebetriebe) and German private limited companies (GmbHs) have been hit hardest by corporate insolvency in the first six months of the year. A total of 6,391 industrial enterprises became insolvent – representing 41.6 per cent of insolvency statistics. In the case of private limited companies there were 5,941 cases of insolvency (representing 38.7 per cent of insolvency statistics). In Germany, trading concerns with limited liability (Unternehmergesellschaft [haftungsbeschränkt]) now rank third among corporate insolvencies with a share of 5.7 per cent. In the last half-year there have been11 per cent more insolvencies for this form of company than in the comparable half-year in 2012.

A large number of corporate insolvencies in Germany continue to affect newly founded companies. A total of 3,808 companies that had been active on the market for less than two years reported insolvency. Just under a quarter of all corporate insolvencies in Germany can thus be attributed to start-ups. A lack of capital resources in the start-up phase in particular results in financial difficulties. Business start-ups also fail if their business ideas prove to be unsuitable for the market. Furthermore, changes in the market; strategic mistakes and lack of internal competence cause young entrepreneurs the greatest difficulty.

The main reasons why companies go bankrupt are a lack of new orders or the cancellation/postponement of orders which have already been placed. Customer payment behaviour also has a direct effect on companies’ liquidity. Companies battling with high payment defaults in particular have only limited financial leeway. This sets off a domino effect, starting with delays in payment; liquidity shortages and financial difficulties and ending up with some companies being driven into bankruptcy. At present some 20 per cent of corporate insolvencies result from this domino effect. In addition, mismanagement is often responsible for an increased risk of insolvency. Inaccurate market assessments or faulty product planning as well as investment errors can cause companies to fail – as can lack of competitiveness.

Imprint

CRIF Bürgel GmbH
– Branch Head Office –
Leopoldstraße 244
80807
München
Fax:  +49 40 89803-777/778
X