A rebound in business failures in the first quarter

The Altares consultancy firm has recorded almost 10,000 business failures in the first quarter of 2022, up 34.6% year-on-year. However, the level of insolvencies remains lower than before the start of the health crisis. The economic and social resilience plan should help to contain the current rise.

Company insolvencies: the end of the "whatever it takes" approach

According to a study by consulting firm Altares, "Études de défaillances et sauvegardes des entreprises en France au premier trimestre 2022", 9,972 business failures were recorded between January and March 2022, representing an increase of 34.6% on the first quarter of 2021.

Over the past two years, economic support measures and the tolerance of social organizations have helped to considerably reduce the number of business failures. In 2021, the Banque de France recorded just 27,285 insolvencies, compared with 32,184 in 2020.

Despite the rebound observed in the first quarter of 2022, the level of insolvencies remains below that seen before the start of the health crisis. In 2019, 52,000 business failures were recorded, compared with around 30,800 over a rolling 12-month period.

While companies on the whole are managing to keep their heads above water, structures with between 10 and 49 employees are particularly vulnerable. The number of insolvency proceedings initiated against them has risen by 56% in the space of a year, and is higher than before the Covid-19 pandemic.

Furthermore, young companies, created less than 5 years ago, account for almost half of all insolvencies recorded in Q1 2022, and 20% of insolvency proceedings concern companies less than 3 years old.

This upward trend in insolvencies is, at least in part, linked to the record number of business start-ups in 2021. Last year, nearly one million businesses were created, representing a 17% year-on-year increase.

Among these young companies, certain sectors such as personal services, retail and catering were particularly hard hit by last winter's epidemic rebound and the drop in consumption.

A contained rise thanks to the resilience plan

While the manufacturing industry has so far held up well, the invasion of Ukraine and soaring raw material and energy prices could well change the situation. Companies that had recovered some of their cash flow will have to cope with high costs, and not all of them will be able to pass these increases on to their sales prices.

According to a study by credit insurer Allianz Trade, the economic and social resilience plan should help avoid around 6,400 insolvencies, but only companies able to prove that they have been weakened by the Russian-Ukrainian conflict will be eligible.

Research firm Altares forecasts 35,000 business failures this year, while Allianz Trade estimates the total number to be between 31,000 and 39,000. The duration of the war in Ukraine and the nature of the sanctions imposed on Russia could, however, have an impact on these estimates.