Although the level of business failures remains very low, there was a slight increase in the second quarter. Most of the companies concerned are very small businesses with fewer than 6 employees.
Business insolvencies on the rise again
According to the latest figures from Altares, 6,587 companies opened insolvency proceedings between April and June 2021, up 14.2% on the same period in 2020, when the country was going through its first confinement.
While the number of business failures has risen slightly, it remains almost half that of the second quarter of 2019. What's more, while 43,400 jobs were at risk at the end of June 2020, there were fewer than 20,000 a year later.
However, it seems that the gradual disappearance of state aid to businesses is signaling the start of a return to a more normal level of insolvencies. Whereas the number of insolvencies had fallen by 40% at the end of March, by the end of June it had fallen by just 28%.
In addition, the rate of company liquidations is very high, as highlighted by Altares. Of the 6,587 insolvency proceedings opened in the 2nd quarter, 4,927 resulted in direct judicial liquidation. The situation of companies appearing in court is so bad that, in the majority of cases, no alternative can be proposed to them at this stage.
VSEs account for almost 90% of business failures
Among companies weakened by the health crisis, VSEs with fewer than 6 employees are the hardest hit, accounting for 89% of business failures in Q2.
In contrast, companies with more than 1,000 employees have only one failure: the Appart'City hotel group's serviced residences, which have been the subject of a safeguard procedure since April 15.
Companies in the construction sector are bearing the brunt of the health crisis, with insolvencies up 38% in the 2nd quarter. Logistics and transport were also hard hit, with insolvencies up 29.5%. Insolvencies in the agricultural sector were more than twice as high in Q2 2021 as in Q2 2020.
Certain sectors, which still benefit from substantial state aid, are more protected. These include trade, industry, clothing and agri-food.
Altares also noted regional disparities. The hardest hit are the Île-de-France and Provence-Alpes-Côte d'Azur regions, where business insolvencies rose by over 36% in one year. Conversely, in some regions, the trend is still downwards, as in Brittany, Hauts-de-France and Normandy.
According to Thierry Million, the firm's Director of Research, insolvencies should stabilize in the 3rd quarter, due to the vacation period and the current business-friendly economic climate. It should rise again in the final quarter of 2021, though not to the same level as in 2019.
However, trends depend on a number of factors that are difficult to anticipate, such as soaring raw material prices, the intensity of the epidemic's resurgence due to the Delta variant, and the economic climate.