Munich, Frankfurt These are figures that are frightening at first glance: there are said to be 16 percent more insolvencies this year, with a nominal impact of 17,000 companies. In 2024, the number is expected to increase by another six percent. More than 18,000 other companies could then go bankrupt in Germany. This is the forecast from Allianz Trade, Allianz’s credit insurer.
“But we don’t see a wave of bankruptcies in this, but rather a normalization,” says Milo Bogaerts, CEO of Allianz Trade for the region Germany, Austria and Switzerland for a year, in an interview with the Handelsblatt. After all, the insolvency figures were at their lowest level since the 1990s until the outbreak of the corona pandemic and have only been rising since then. The Leibniz Institute for Economic Research Halle (IWH) also recently wrote that the German insolvency figures are still low in a long-term comparison.
This is not least due to the government support programs since the outbreak of the corona pandemic. “By 2023, around 2,600 companies in Germany will have been saved from bankruptcy,” estimates Bogaerts. In similar phases in the past there have been significantly more bankruptcies.
The Allianz subsidiary Allianz Trade – formerly known as Euler Hermes – is the world market leader in commercial credit protection with a market share of around one third. The past few years with the pandemic, the Russian war of aggression in Ukraine, rapid inflation and high energy prices have been particularly challenging.
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Some risks had to be completely reassessed or reassessed because the damage had increased massively. At the end of last year, the industry association of insurers, GDV, already recorded an increase in damage in goods and suretyship insurance by around half to almost 700 million euros.
More resistant to crises than the European competition
This year, the threats to business continue to grow, albeit in different areas. The industrial insurer AGCS, which also belongs to Allianz, recently presented its barometer for the most important business risks this year. Accordingly, German companies most often fear business interruptions, followed by concerns about cyber incidents and the energy crisis.
In addition, fears of persistently high inflation and a possible recession are growing. The pandemic, on the other hand, no longer features in the top ten of the greatest dangers. Natural disasters and climate change also fall behind in the global ranking.
Bogaerts sees the greatest challenges for Germany since the post-war period in the current situation. It is now paying off that the German economy is in a good position. Above all, the solidly financed medium-sized companies are robust against the multitude of external disturbances. Therefore, Germany is not threatened by a wave of insolvencies.
“That’s why we don’t expect a deep recession in Germany, but rather a slight contraction of the economy by 0.7 percent this year,” says Bogaerts. This is not bad news, according to the Dutchman, but even a mild recession remains a recession. For 2024, he forecasts slight growth of 0.6 percent for the German economy.
In the Netherlands, Sweden and Norway, insolvencies are also below the level before the outbreak of the corona pandemic. According to Allianz Trade, companies in neighboring countries have a harder time. In France and Great Britain, for example, the bankruptcy numbers are already significantly higher than in Germany. The credit insurer expects corporate bankruptcies to increase by around 20 percent worldwide this year.
The Allianz Trade Manager observes that companies around the world are paying their bills later and later.
These are alarm signals for the German economy, which is particularly dependent on exports. After all, partner companies that are in financial difficulties are also a burden on German companies.
“Overall, payment practices have deteriorated,” Bogaerts observes. While in Germany invoices are paid after 54 days and thus only two days later than in the reference year 2008, companies in other countries have to wait longer for their money.
Between 2008 and 2021, bills were paid worldwide after an average of 57 days. In the crisis year 2022, payment behavior decreased again. According to Allianz Trade, invoices were paid seven days later than in the previous year up to the third quarter.
There has not been such an increase in the past 13 years. “In general, we observe that companies that always exhaust payment terms are also the first to make payments completely,” says Bogaerts. Especially in southern and eastern Europe, payment terms are handled more flexibly than in Germany anyway.
Construction industry particularly often in arrears
There are also major differences between the individual sectors. Above all, payment practices in the construction industry fell sharply worldwide last year (ten days longer until bills are paid), in the electronics sector (plus nine days), in hotels and catering and for household goods (plus seven days each). On the contrary, financial service providers are now paying their bills two weeks earlier, for computer and IT companies it is three days, for energy companies two days.
The main reason why companies are putting off paying their bills is the massive increase in oil, gas and electricity prices, which are weighing heavily on them. The energy-intensive sectors such as the metal or paper industry in particular feel this.
According to Allianz Trade, many companies are now being helped by the financial buffer that they had built up over the years. But that doesn’t solve the fundamental problem. “The energy crisis is the biggest shock to corporate profitability, especially in Europe,” said Ludovic Subran, chief economist at Allianz.
However, all of these are only general indicators for taking out credit insurance. In principle, Allianz Trade looks at each company individually before concluding a deal, explains Germany boss Bogaerts. It doesn’t matter which country the customer or the customer’s customers come from.
Increased risks would generally mean more new business for Allianz Trade. Because German exporters were increasingly looking for protection. “If payments come later, customers often want to protect themselves against it,” says the Allianz trade manager.
For retail banking companies, inflation brings another challenge as people have less money to spend. “With the exception of groceries, you will continue to see a great deal of reluctance to buy for most goods,” predicts Bogaerts of the retail trade. As in the past, many micro-enterprises are likely to suffer as a result this year.
But it could also hit large retail chains that had failed to position themselves for the future. Last year, the department store chain Galeria and the shoe retailer Görtz had to file for bankruptcy.
For the year that has just started, Allianz Trade is forecasting a slight decline in inflation in Germany to 6.8 percent before it almost returns to normal at 2.4 percent in 2024. After all, there are signs of slight progress in the supply chains due to the gradual opening of the Chinese market. “Even if the restart is bumpy, this will be good for world trade in the medium term and will lead to a relaxation in the supply chains,” Bogaerts expects.
More: Payment defaults in Germany are skyrocketing