Information about businesses across continents falling into bankruptcy has appeared continuously in recent times. According to recent survey results announced by Tokyo Shoko Research, the number of bankrupt businesses in Japan in 2023 increased by 35.2% compared to 2022, to 8,690, reaching the highest level in the past four years.
The “dark cloud” of bankruptcy is also covering Europe. The German Institute for Economic Research has published estimates showing that up to 18,100 companies in Germany filed for bankruptcy in 2023, an increase of 23.5% compared to 2022.
Meanwhile, more than 55,000 businesses in France had to close, marking a record high in the number of companies ceasing operations since 2017. About 10,000 companies in Switzerland were also dissolved in 2023. In particular, bankruptcy due to debt is increasing.
The Financial Times cited data from national statistical offices showing that the wave of bankruptcy around the world is happening at a rapid and unprecedented pace in decades.
In the 12 months to September 2023, insolvency of US businesses increased by 30% over the same period last year. According to the European Union Statistical Agency (Eurostat), in the nine months from the beginning of 2023, the number of businesses in the European Union (EU) declaring “game over” increased by 13% over the same period in 2022, reaching highest in the past eight years.
Meanwhile, the Organization for Economic Cooperation and Development (OECD) also said that in some member countries, the bankruptcy rate has exceeded the level that occurred during the 2008-2009 global financial crisis. The sectors with the most businesses having to cease operations are hotels, transportation and retail.
Analysts believe that the end of support programmes during the COVID-19 period is the leading cause of this evil wave spreading.
According to estimates by the International Monetary Fund (IMF), in 2020 and the first four months of 2021 alone, governments spent more than 10 trillion USD to support businesses and families.
These huge financial support packages are a lifebuoy to help many businesses survive the difficult period of the pandemic. Chief economist at Capital Economics Neil Shearing, said that many companies have become insolvent and can only survive thanks to government support.
So now, as most support packages have ended, the previous shortcomings and weaknesses of businesses are becoming more and more exposed, leading to mass bankruptcy. In addition, expensive energy prices and high-interest rates also increase the burden, making it impossible for many companies to survive.
Worryingly, the wave of bankruptcies is forecast to continue in 2024 as many companies reach debt maturity at higher interest rates. Financial services company Allianz (Germany) forecast that the number of bankrupt businesses globally will increase by at least 10% in 2024, after increasing by about 6% in 2023.
The negative impact of crises in 2023 will be more clearly evident in 2024, leading to the insolvency of many companies, especially in retail, fashion, healthcare, real estate and construction.
Businesses in other industries, such as food services, auto parts, and mechanics, also face a high risk of having to close. In addition, tightened monetary policy also pushed some startups and small and medium-sized enterprises closer to the brink of bankruptcy.
The wave of business bankruptcies could have long-term consequences for global economic growth and the job market in the coming years. However, analysts expected that the peak number of business bankruptcies will not be as high as in previous crises because many governments have maintained energy subsidies and economic growth stimulation measures.
