Corporate insolvencies fall by 5.4 percent in 2015, but still cause billion-dollar losses - men lead companies to insolvency twice as often as women
1. Introduction: Sixth consecutive decline - 23,222 companies declared insolvency
The number of corporate insolvencies in Germany in 2015 continued to decline. Last year, 23,222 companies declared insolvency. This represents a decrease of 5.4 percent compared to 2014 (24,549). "It is the sixth decline in corporate insolvencies in a row and the lowest level since the introduction of the Insolvency Law in 1999", mentioned Bürgel's CEO, Dr. Norbert Sellin, on the latest figures. In a ten-year comparison, the number of corporate insolvencies fell by 36.9 percent. Still, 2005 saw 36,843 bankruptcies in Germany alone.
2. Causes of declining corporate insolvency figures - Fewer corporate insolvencies are also expected in 2016
“German-based companies take advantage of the favourable local conditions", said Dr. Sellin. The declining number of insolvencies can be largely attributed to the stable domestic economy and favourable financing conditions. On the other hand, high employment levels drive consumer spending, and the economy as a whole. Since there is a close relationship between economic development and the incidence of corporate insolvency, the favourable economic environment is regarded as the main reason for the renewed decline in corporate insolvencies. Having said that, cyclical downturns will always lead to increased corporate crises and, thus, further insolvencies. "For 2016, we expect a decline of 2 percent and 22,700 corporate insolvencies", predicts Dr. Sellin. However, a weaker development of the world economy, especially connected to a deterioration in China's situation, could raise corporate uncertainty. In such a scenario, further corporate insolvencies would not be surprising.
3. Men lead companies to insolvency twice as often as women do
Politicians and the public in general address the topic of "women in leadership positions" from time to time. For the first time, the financial information agency Bürgel has investigated which gender is in fact responsible for more corporate insolvencies. The results speak for themselves: male executives are responsible for corporate insolvency twice as much as women holding similar positions. According to the analysis report, 85 per 10,000 (0.85 per cent) companies with one or more male decision-makers (e.g., manager or owner) declare insolvency, whereas only 42 per 10,000 of companies (0.42 percent) with one or more women in the executive suite do likewise. Also, companies with mixed-gender management appear less exposed to insolvency (50 per 10,000 companies, 0.5 percent). In absolute terms, 18,676 (80.5 percent) companies were declared insolvent by decision of a single management member.
4. Negative developments of insolvency rates in 2015
Despite the sixth decline in a row, 2015 witnessed a few negative developments. Corporate insolvencies continue to lead to losses in the billions and, therefore, have a high economic relevance. In total, the damage caused by insolvencies in 2015 amounted to around 19.7 billion Euro (2014: EUR 26 billion). This decline is primarily due to the comparatively low number of major insolvencies in the year 2015. In addition, corporate insolvencies left over 220,000 workers unemployed. Imtech, with nearly 3,500 employees, was the largest single insolvency in 2015. There is another negative trend that continues well into 2015 - the Entrepreneur Company (limited liability) is a legal form leading to numerous insolvencies. Compared to last year, the number of cases in this segment rose by 4.6 percent to 2,144. Thus, the UG contributes with a 9.2 percent to overall insolvency in Germany.
5. Corporate insolvencies per federal state: Nordrhein-Westfalen leads the insolvency statistics
In 2015, 23,222 companies declared insolvency in Germany. This corresponds to 0.7 percent of companies nationwide. Year 2015 saw large regional differences between individual federal states. Like last year, most insolvencies took place in North Rhine-Westphalia. The largest federal state led the insolvency statistics in absolute and relative terms. In 2015, 7,326 or 109 per 10,000 companies declared insolvency in North Rhine-Westphalia. There were also many insolvencies in Bavaria (3017), Lower Saxony (1973) and Baden-Württemberg (1860). In relative terms (corporate insolvencies per 10,000 companies), however, the ranking looks somewhat different. After North Rhine-Westphalia (109), Bremen had the highest insolvency density with 105 insolvencies per 10,000 companies. It is followed by Berlin (95), Hamburg (93), Schleswig-Holstein (90), Saarland (89) and Saxony-Anhalt (85), all of which exceeded the national average of 72 insolvencies per 10,000 companies. In 2015, the lowest number of corporate insolvencies was found in Baden-Württemberg (42 per 10,000 companies), followed by Bavaria (50), Thuringia and Brandenburg (each 52).
6. Percentage changes: The number of cases rise in four states, with a notable decrease in Brandenburg
The number of cases increases in four states, going against the national trend. The most significant growth was recorded in Bayern with four percent more insolvencies. But even in Berlin (+3.7 percent), Mecklenburg-Vorpommern (+2.7 percent) and in Baden-Württemberg (+1.5 percent), the year 2015 brought more insolvencies over the prior year. The most significant decrease was recorded in Brandenburg with 15.9 percent fewer bankruptcies. The states of Thuringia (minus 14.6 percent), Bremen (13.0 percent), Lower Saxony (11.9 percent) and Rhineland-Palatinate (10.8 percent) also showed double-digit declines.
7. Corporate insolvencies by legal form: the Entrepreneur Company (limited liability) remains the legal form most exposed to insolvency risk
Furthermore, the highest shares of insolvency in Germany arise in the following legal forms: Unregistered commercial enterprises and individual companies (40.5 percent, 9,420 cases), as well as in Private limited companies (Ltd.) (9,265 cases, 39.9 percent). The Entrepreneur Company (limited liability) has continued its negative trend and increased its share of total insolvency. Insolvencies rose by 4.6 percent to 2,144 cases. In relative comparison, the Entrepreneur Company (limited liability) leads current insolvency statistics. The rate reaches 225 insolvencies per 10,000 companies.
8. Corporate insolvencies by industry: the Logistics industry is the most affected by insolvency
In terms of insolvency density, logistics companies stand at the top of the corporate insolvency ranking. In 2015, this industry reported 138 insolvencies per 10,000 companies. This is followed by Construction (97) and Retail (78). On the other hand, Energy (16) and Manufacturing (45) fared relatively well.
9. Company size: more and more small businesses are affected by insolvency
In 2015, insolvency statistics by company size reveal the particular exposure of small businesses to insolvency risk. The proportion of companies with up to 5 employees stood at 80.1 percent. The larger the workforce, the lower the proportion of insolvent companies. Furthermore, 8.7 percent of companies declaring insolvency had between 6-10 employees. For companies with 51 or more employees, the proportion of overall insolvency dropped to 2.8 percent.
10. Causes of corporate insolvencies: insolvency often stems from different factors
Corporate crises leading to insolvency are not rooted in a single cause but arise from the interaction of various crisis-causing factors. The current economic situation is only one factor in the ultimate success or failure of enterprises. Corporate insolvencies also arise from other reasons, both internal and external to the company. Changes in the legal framework, technological change, changes in exchange rates in foreign trade or the insolvency of a major business partner (domino effect) are examples of outside influences that can steer a company down the wrong financial path. Internal causes, such as low equity base, defects in the product area (quality, price, product attributes), management problems or mistakes can lie in all functional areas, and trigger an insolvency.