myA wave of bankruptcies is sweeping through Germany – or at least that’s what it seems. Because the number of cases increases continuously and, above all, by leaps and bounds. In October, the Federal Statistical Office reported 22.4 percent more company insolvencies than in the same month last year. According to official figures, in the previous five months the increase rates were also in the double-digit percentage range, starting with 14 percent and ending with 35.7 percent.
The negative impression is reinforced by prominent names that repeatedly appear in bankruptcy reports, be it the supermarket chain Real or the shoe retailer Reno. But also the toy manufacturer Haba, the fashion house Peek & Cloppenburg, sports specialists such as Tennis-Point and Fahrrad.de and the canning jar manufacturer Weck are affected by bankruptcies.
In fact, the situation is very tense in certain sectors, especially in the healthcare sector, such as nursing services and hospitals, as well as in the construction industry. In general, the professional association of German insolvency administrators and trustees (VID) does not want to know anything about a wave of insolvencies.
“The numbers are increasing again and it is dramatic,” he says. The German economy also still faces many challenges due to the coronavirus pandemic and the impact of inflation and the war in Ukraine.
“A wave of insolvencies cannot be demonstrated with concrete figures,” says VID President Christoph Niering. In a long-term comparison, even the current significant increase only means a normalization of insolvency events.
In fact, the numbers are still well below the values of the 2000s and 2010s, when there were sometimes twice as many bankruptcies as before. This is also because in recent crisis years many companies were saved from insolvency with massive government aid and sometimes even the obligation to file for bankruptcy was suspended.
Bankruptcies set out above
This led to the paradoxical situation that, in one of the biggest crises in the German economy, insolvency statistics periodically reached new lows. The starting point is correspondingly low and the rates of increase are also high.
However, sometimes there are individual sectors that come under massive pressure. According to the VID, this affects, on the one hand, the construction sector and the real estate sector, which is in a difficult situation due to the sharp increase in construction prices and the increase in interest rates.
“After the construction boom of the last decade, a market shakeup has begun here, which especially affects those companies that have launched more expensive projects with a very high proportion of borrowed capital,” explains the association’s president, Niering. . Apart from property developers and developers, artisans will soon also find themselves in trouble.
On the other hand, there are increasing disruptions in the healthcare system. Barely a week goes by without operators of hospitals, social centers or nursing services declaring bankruptcy.
A recent study by Diakonie Deutschland shows how critical the situation is for the latter. According to this, 72.7 percent of the 526 outpatient care services surveyed evaluated their economic situation as tense. In about a third of facilities, the liquidity reserve only lasts three months or less.
According to Diakonie, the reasons include, for example, delays in payments or significantly higher costs in relation to the remuneration paid, for example because fee increases are not immediately taken into account. According to the survey, 54 percent of nursing services will have already suffered losses in 2022 and 62 percent expect a negative result in 2023.
Emergency situation in hospitals and nursing services.
The tense situation can quickly become a major problem for society. After all, 84 percent of the approximately 4.9 million people in need of care in Germany receive care at home. And outpatient services play a central role in this. “The survey is an alarm signal,” says Maria Loheide, social director of Diakonie.
“Home care for people who need it is at serious risk.” And not only because of economic problems. At the same time, there is also a huge shortage of skilled workers in the industry.
But there is also an emergency in hospitals. Since November 2022, 26 providers with a total of 34 clinics have declared bankruptcy, the German Hospital Association (DKG) announced in October.
And more bankruptcies could only be avoided because local municipalities stepped in as saviors. Insolvency does not necessarily mean closure.
But according to a survey by consulting firm Roland Berger among the 600 largest clinics in Germany, more than half are currently making losses. The federal government is now trying to stabilize the sector with hospital reform.
The situation of the health system is dramatic
However, VID head Niering does not expect the situation to improve in the short term: “Even if the law is quickly implemented, the first measures announced for 2024/2025 will come too late for many hospitals.”
Niering expects insolvency cases in the healthcare sector to increase even further in the coming months. However, the Cologne bankruptcy administrator no longer believes in new record levels with almost 40,000 bankruptcies each year as in 2003 and 2004.
“We will not see something like this again in the future,” says Niering, explaining this for “structural reasons.” An often overlooked factor is the declining number of startups in Germany for years.
“It is precisely in the first five years after their founding that companies are at greatest risk of insolvency. A smaller number of startups has a direct impact on the number of insolvencies.”
For Niering, the creation of fewer companies is a warning sign for local economic policy. “It has been a long time since the business landscape has been sufficiently renewed. But if not enough new companies appear, the potential for innovation decreases.” That’s why it’s important to create a more founder-friendly environment.