The effects of the Covid-19 crisis are still being felt by businesses. Insolvencies are at their highest level for at least 8 years, with an increase of 16.5% in the EU over one year, according to Eurostat figures published on February 17. Read on to find out more.
More bankruptcies in the transport sector
The European Commission's Directorate General for Statistical Information, Eurostat, reports that business insolvencies in the European Union rose by 16.5% in 2022, with a jump of 26.8% in the last quarter. The EU statistics office recorded an initial peak in Q3 2020 just after the outbreak of the health crisis, before a more notable rise in Q1 2021.
🗙 💰 The number of bankruptcy declarations among EU businesses increased substantially in Q4 2022, +26.8% compared with the previous quarter.
- EU_Eurostat (@EU_Eurostat) February 17, 2023
🏢 Registrations of new businesses decreased by 0.2% in Q4 2022.
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Among the sectors most affected by the rise in bankruptcies are transport, logistics and warehousing (+72.2% in Q4 2022), hotels (+39.4%), services, health and education (+29.5%).
🗙 💰 All sectors in the EU registered increases in the number of bankruptcies in Q4 2022 compared with the previous quarter.
- EU_Eurostat (@EU_Eurostat) February 17, 2023
Highest in:
🚛 Transportation and storage (+72.2%)
🏨 Accommodation and food services (+39.4%)
👉 https://t.co/0iCMlvmK65 pic.twitter.com/aohCOwlB0j
Compared to 2019, the figures are even more alarming: almost 100% increase in bankruptcies in the hotel and catering sector, over 85% in transport. Only three business sectors saw declines in Q4 2022 compared to Q4 2019: industry (-17.6%), construction (-9.2%), information and communication (-4%).
💰 📉 The number of declarations of bankruptcies in Q4 2022 compared with the pre-pandemic Q4 2019 was lower in only 3 sectors of the economy:
- EU_Eurostat (@EU_Eurostat) February 17, 2023
🏭Industry (-17.6%)
🏗️Construction (-9.2%)
🌐Information and communication (-4.0%)
👉 https://t.co/0iCMlvmK65 pic.twitter.com/yvkvdAa5lc
End of state aid
There are several possible explanations for these figures, not least the end of government subsidies in both 2020 and 2021. During these periods, companies were able to take advantage of arrangements such as reductions in social security contributions or debt restructuring to maintain their activity. Added to this is the drop in business start-ups (down 0.2%) and therise in energy prices, which has led to increasing difficulties for certain structures that have now been placed in receivership. Examples include the San Marina shoe store, the Kookaï brand and Pimkie.
Judicial liquidation has immediate consequences:
- the manager is relieved of his duties and the company's activity is halted;
- legal action is suspended;
- interest and surcharges are frozen;
- employees' employment contracts are terminated;
- claims against the company become immediately due and payable.
In addition, the company concerned must also manage its pro account.
Bankruptcies soar in Spain
While the number of bankruptcies fell in Germany and Italy, the figures rose in Spain. The country was faced with a change in legislation that made it easier for companies to negotiate their debts in court. As a result, bankruptcies rose by 50% in the second quarter.
Thus, the rise in business failures in the EU is partly linked to the long-term effects of the Covid-19 crisis.