Europe in the Midst of an Insolvency Wave
February 6, 2002
The economic downturn has brought a dramatic rise in insolvency levels, according to economic-data agency Creditreform in its latest survey.
In 2001, the number of insolvency cases in Europe totaled 199,448, a rise of 5.9% on the 2000 figure. This represents an acceleration in growth from the 2.3% seen between 1999 and 2000.
Millions in job losses
The number of jobs lost as a result of company insolvencies rose from 1.1 million in 2000 to 1.4 million in 2001. Germany saw 18.7% more insolvencies in 2001 than in 2000, giving it the fourth-highest rise in Europe.
In absolute terms, it had the most insolvency cases in Europe with 49,600, of which 32,400 were company insolvencies. The remainder were individuals.
The total number of jobs lost was 500,000. The total value of claims against insolvent companies rose to 32.2 billion euro from 27 billion euro in 2000. According to Creditreform's Helmut Rödl, these figures make Germany the European leader in insolvencies. He put down the strong growth in insolvencies to the high proportion of business start-ups that had been unable to hold their own on the market.
Creditreform sees no improvement in sight in 2002. If the credit charges imposed upon businesses continue to rise, it expects the total number of insolvency cases to rise from last year's 199,488 to 210,000.
It expects Germany's total number of insolvency cases to rise to 60,000 from 49.600 in 2001, with a total of some 550,000 jobs to be lost as a result. Seven insolvency cases last year involved businesses with total turnover of over 1 billion euros.
The companies involved were Swissair, Britain's Railtrack, France's Moulinex, Belgium's Sabena, Swiss André, Britain's Federal Mogul, and France's AOM Air Liberté.
German companies in top 20 bankruptcy cases
Five German companies were in the top 20 bankruptcy cases by turnover.
They are retailer Ernst Brinkmann, with sales of 870 million euro; timber merchant Hornitex Werke with sales of 447 million euro; film licensing group Kinowelt, with sales of 300 million euro; telecoms company Teldafax, with sales of 237 million euro, and retailer Max Sebold with sales of 208 million euro.
As Creditreform's Rödl said, it is the bigger companies whose insolvency makes headlines. But the larger insolvency cases are the exception, and most companies that become insolvent are small and midsized businesses.
Construction faces another hard year
One sector that had a particularly tough year was construction, and the industry accounted for 20% of all European insolvency cases last year.
Germany accounted for around 33% of all Europe's construction-industry insolvencies. The manufacturing industry, too, saw its share of all Europe's insolvency cases rise by 2.7 percentage points to 14%.
But the sectors that were most prone to bankruptcy remained services (37.8% of the European total) and retail and wholesale (28%).