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Business failures at their lowest level for 30 years

Published January 20, 2021 - 2 mins reading time
Bank watch
In the midst of a health and economic crisis, the number of bankruptcies has not been this low since 1987, according to a study by Altares, a firm specializing in business data. However, this is only the calm before the storm: the phasing-out of public aid will inevitably lead to an increase in bankruptcies.

20,000 companies escaped bankruptcy

As the Altares study reveals, the number of business failures has fallen by almost 40% compared with 2019. In 2020, despite the health crisis, only 32,184 companies went before the commercial or judicial court, 38% fewer than in 2019.

To find such a low level of business failures, we have to go back to 1987, which seems paradoxical in this context of health and economic crisis, which has seen the country's GDP fall by 9% in just a few months.

Compared with 2019, 20,000 fewer businesses have gone bankrupt, and the phenomenon is the same across the country, with all regions seeing a drop in the number of insolvencies.

However, 2021 is shaping up to be the year of all risks: the gradual withdrawal of public subsidies, to which many companies currently owe their survival, will automatically lead to a sharp rise in bankruptcy filings.

A rise in insolvencies in 2021 and 2022

While the current health situation is still far too gloomy for the government to abruptly put an end to the various public aid schemes, the situation is likely to change once the vaccination campaign is sufficiently advanced.

Altares predicts around 50,000 business failures in 2021, and 60,000 in 2022, which would mean the loss of 200,000 jobs in 2021 alone, to which must be added redundancies and layoffs.

According to the experts, aid to businesses in 2021 should gradually become more targeted, to save viable companies and, conversely, stop supporting the most fragile. According to Altares, this change of direction would enable liquidity to be reallocated, thereby limiting breakage.

"The challenge for 2021 will be to gradually reawaken the economy so as to enable viable companies to grow, and the courts to offer companies weakened or even devastated by Covid-19 the best exit or rebound solution," concludes Thierry Millon, Director of Altares studies.