Corporate Insolvencies, 1st Quarter 2013

The number of corporate insolvencies in Germany rose in the 1st quarter of 2013. Altogether, 7,460 companies became insolvent during the first three months of the year. This corresponds to a slight increase of 0.8 percent compared with the corresponding period of the previous year and is the result of the current survey on “Corporate Insolvencies, 1st Quarter 2013” published by the financial information agency Bürgel.

“For the year 2013, we forecast a slight increase of one percent to just under 30,000 corporate insolvencies,” said Bürgel's executive manager, Dr. Norbert Sellin, commenting on the current figures. This means that after three years of declining figures, corporate insolvencies will once again increase in 2013.
“The weak economy in the 4th quarter of 2012 is currently having a delayed effect on the number of corporate insolvencies,” said Dr. Sellin. The economic situation in Germany has, however, stabilized somewhat in the 1st quarter of 2013. The rate of growth in the first three months was 0.1 percent; however; many economic analysts' indicators suggest a stronger increase. In the first three months, it was especially the private households that provided a strong impulse for the economy: their expenditures increased due to the rise in wages and steady employment. On the other hand, as a result of the uncertainty arising from the debt crisis companies in Germany invested less and German exporters continue to suffer from the effects of the sluggish global economy.

North Rhine-Westphalia heads the insolvency statistics in absolute figures: 1,949 companies in this state became insolvent. However, Bavaria (965 corporate insolvencies), Baden-Württemberg (798), Lower Saxony (747) and Hessia (543) also show high figures in absolute terms.
A more differentiated picture emerges from a relative comparison that focuses on company density in the federal German states. When looking at corporate insolvencies per 10,000 companies, Bremen heads the insolvency statistics (35 insolvencies per 10,000 companies).

Insolvency proceedings per Federal StatePercentaged change in corporate insolvencies

Saxony-Anhalt (32 cases per 10,000 companies), North Rhine-Westphalia (30), Saxony, Schleswig-Holstein and Lower Saxony (28 each), Thuringia (26), Saarland and Berlin (25 each) also rank above the federal average of 24 insolvent companies per 10,000 companies. Bavaria (17 insolvencies per 10,000 companies) followed by Baden-Württemberg (18) and Brandenburg (19) had the lowest number of insolvencies.
Not all of the federal states show slightly increasing figures for corporate insolvencies. Eight states actually show declining figures. Thuringia reported the strongest decline: 5.2 percent fewer insolvent companies compared with the corresponding period of the previous year. There were also fewer insolvencies in Brandenburg (minus 5.1 percent), Baden-Württemberg (minus 3.3 percent), Saarland (minus 2.2 percent) as well as in Lower Saxony (minus 1.3 percent), Bavaria (minus 1.2 percent), Schleswig-Holstein and the Rhineland-Palatinate (minus 0.6 percent).
Saxony-Anhalt reported a strong increase of seven percent more corporate insolvencies. The number of cases also increased in Berlin (plus 6.4 percent), Hamburg (plus 6.3 percent), Saxony (plus 5.6 percent) and Mecklenburg-West Pomerania (plus 4.9 percent).

Many young companies have been affected by insolvency and this negative trend continues in 2013. More than one-quarter (26 percent) of all insolvencies in the 1st quarter of 2013 were reported by companies that had been active on the market for less than two years. In particular, a lack of capital resources in the start-up phase leads to 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.
In the 1st quarter of 2013, German private limited companies (GmbHs) were hit hardest by corporate insolvency. They make up for 35.5 percent in the insolvency statistics. Industrial enterprises (Gewerbebetriebe) are also among the legal forms hit hardest: almost every third insolvent company is an industrial enterprise (31.6 percent; in absolute figures: 2,360). In Germany, trading concerns with limited liability (Unternehmergesellschaft [haftungsbeschränkt]) rank third among corporate insolvencies with a share of 5.8 percent.

The main reasons why companies go bankrupt continue to be: first, lack of new orders or cancellations or the postponement of orders that have already been placed. Furthermore, customer payment behaviour has a direct effect on companies' liquidity. In particular, companies that battle with high payment defaults have only limited financial leeway. This sets off a domino effect that starts with delays in payment, liquidity shortages and financial difficulties and ends up driving some companies into insolvency. Currently, approx. 20 percent of all insolvent companies were hit by the domino effect. In addition, mismanagement is often responsible for an increase in the risk of insolvency. Inaccurate market assessments or faulty product planning as well as investment errors can cause companies to fail. The lack of competitiveness can also lead to a company's insolvency.

Imprint

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