1. Overview: Temporal distribution of bankruptcy cases, regional and structural differences
The economic crisis is continuing to put German companies under pressure. From January to July 2009 a total of 15,891 companies filed for bankruptcy in Germany – a clear 30.93 percent more than during the same period of the previous year (January to July 2008: 12,137). During the second quarter the number of companies hit by insolvency was 6,745 – this corresponds to a minimal decline of 0.3 percent in comparison with the first quarter. These are the results of the survey “Corporate Insolvencies” carried out by the financial information agency Bürgel.
Whereas the market experienced a slight recovery in May with 2,136 and in June with 2,197 corporate insolvencies, the number of corporate bankruptcies during the following month increased considerably (see Chart 1): In July 2,381 companies applied for creditor protection. This means an increase by just below 8.4 percent in comparison with June.
With regard to region (location of registered head office) and corporate structure (age and legal form of the company) the numeric distribution of insolvencies is very heterogeneous.
2. Insolvency statistics per federal state: North Rhine-Westphalia leads with absolute, Bremen with relative figures
During the survey period January to July, viewed in absolute terms, most corporate insolvencies were incurred in North Rhine-Westphalia (3,193), followed by Bavaria (1,860) and Baden-Württemberg (1.721).
These figures are however only meaningful to a limited extent because the distribution of the companies per federal state tends to be heterogeneous. For this reason the survey compares relative figures of corporate insolvencies. To do so the absolute figure per federal state was set in relation to the number of companies registered there and multiplied by the factor 10,000. The insolvency rate resulting from this presents a differentiated picture at federal state level.
According to this most insolvent companies come from Bremen – 68 per 10,000 companies. The second federal state in this series is Saxony-Anhalt with 63 bankruptcies per 10,000 companies, followed by Schleswig-Holstein (62 per 10,000 registered companies), the Saarland (51), Lower Saxony (51), Berlin (49) and Mecklenburg-Western Pomerania (48). However, the federal average shows a lower rate of 43 per 10,000 companies. The lowest share of relatively measured corporate insolvencies below this average is recorded in Bavaria (31 per 10,000 companies), Hamburg (32), Thuringia (37) and Baden-Württemberg (37).
3. Mecklenburg-Western Pomerania records the greatest increase in a quarterly comparison
Even when comparing the first and second quarters of 2009 a differentiated picture is shown: according to the survey the number of corporate insolvencies fell by 0.3 percent. In July this development was, however, not continued; during this month alone 2,381 companies filed for bankruptcy. This relativises hopes of a rapid decrease in the insolvency rate.
The worst affected by the increase in corporate insolvencies during the second quarter in comparison with the first are the federal states Mecklenburg-Western Pomerania with a plus of 28.78 percent, followed by Brandenburg (plus 16.11 percent) and Hamburg (plus 6.91). Meanwhile the number of companies that applied for creditor protection decreased most in Saxony Anhalt with 15.89 percent. Also in Lower Saxony (minus 11.53 percent), Bremen (minus 8.33 percent) and Thuringia (minus 8.21 percent) the bankruptcy trend is on the decline.
4. Corporate structures: crisis particularly affecting younger companies
It is indeed true that an insolvency risk cannot be automatically derived from the age of the company. However, the current figures (see Chart 5) show that in particular younger companies are being affected by the current financial and economic crisis. In July alone the share of companies that were active on the market for up to two years and then had to apply for creditor protection increased to 20,32 – this corresponds to 484 insolvencies. In relation to the total period of the survey from January to July this ratio amounts to 18.47 percent and affects 2,935 companies.
During the total survey period 42.59 percent of all insolvent companies, that means 6,768 companies, are not older than six years. But also companies that have already existed on the market for a decade, are not immune to insolvency. Thus, a good quarter (26.09 percent) of the 15,891 companies that skidded from January to July into bankruptcy, were active on the market for between 11 and 20 years. Only with the old-established companies does the insolvency risk decrease: accordingly the share of insolvent companies that exist for 50 years or longer, is recorded at only 4.26 percent – this corresponds to 677 companies.
5. Business enterprises go bankrupt the most frequently
Particularly affected by insolvency during the survey period are commercial enterprises with a share of 40.76 percent (6,477 companies) and German GmbHs (private limited companies) (39.16 percent – 6,223 companies). Further 9.56 percent had the legal form of a GmbH & Co. KG or private partnerships (GbRs), which corresponds to 1,519 bankruptcies. Corporations or joint stock companies are only affected by insolvency at a low rate of 0.86 percent, namely 152 corporations.
6. Main causes of increasing corporate insolvencies and the outlook for the future
The causes of corporate insolvencies are complex. Apart from economic factors, business aspects – especially for small, medium and in particular younger companies – strongly determine the insolvency risk. “Although during the second quarter one can observe a decline in corporate insolvencies of 0.3 percent, there is still no cause to be optimistic,” Bürgel managing director, Dr. Norbert Sellin warns. According to forecasts by the Hamburg agency, several factors argue against any optimism.
On the one hand the current figures on corporate insolvencies are at a high level – with increasing tendency. From the fourth quarter of 2008 to the second quarter of 2009 alone, the number of cases increased by 10.9 percent (4th quarter 2008: 6,078; 1st quarter 2009: 6,765; 2nd quarter 2009: 6,745). In July of this year the figure even rose in comparison with the previous month by 8.4 percent.
On the other hand the number of affidavits made and arrest warrants issued – early indicators of a corporate insolvency – rose dramatically during the second quarter: 10,782 affidavits were made, that means 21.2 percent more than during the first quarter. In addition there were 12,043 arrest warrants issued, that corresponds to a rise by 10.3 percent in comparison with the first quarter. As a result, Bürgel expects an increase in corporate insolvencies to as many as 34,000 cases during the year 2009.