In 2023, three-quarters of countries recorded an increase in corporate insolvencies, marking a +7% rise at the global level. The year 2024 may signal an end to the catch-up phase (but not an improvement), as the third consecutive increase in corporate insolvencies (+9%) led two-thirds of countries to exceed pre-pandemic levels. After these incremental yet successive rises, the global number of corporate insolvencies might stabilize in 2025 (0%), albeit at a high level. Poland witnessed a record number of insolvencies in 2023 (+70% year-over-year), which is not expected to rise further, yet the subpar condition (especially profitability) of SMEs will continue to impact the market.
Allianz Trade released its latest Global Insolvency Report today, presenting updated forecasts for 2024 and 2025. According to the world-leading trade credit insurer, after two years of gradual increase in the number of insolvencies in 2022 (+1%) and 2023 (+7%), the pace of increase is expected to accelerate further in 2024 (+9%) before stabilizing in 2025 (0%) at a high level.
Poland experienced the first and most significant increase in insolvencies – hence, the spike is behind us, but the sensitivity (especially of SMEs) persists.
Poland is among the 26 countries that saw a double-digit increase in corporate insolvencies in 2023, with 11 of them experiencing over +30% increase. In this group, Poland, with a 70% increase in the number of insolvencies last year, was only surpassed by Hungary (+146% year-over-year). Compared to the pre-pandemic situation, there is undoubtedly the highest global increase in the number of insolvencies, by as much as +357% from 2019 to 2023. This is largely due to a different approach than on most markets – changes within the restructuring proceedings during these challenging times facilitated and expedited restructuring procedures (rather than being effectively suspended, as in many other markets). After four consecutive years of increases to a record level of 4,467 cases in 2023, we expect the “normalization” of their number not only due to the high base effect but also because of the greater impact of improving economic fundamentals in Poland. However, despite better prospects, we expect economic growth to remain below the pre-pandemic trend, and structural weakness (including low profitability) to persist, especially for SMEs. This leads us to expect only a slightly lower number of insolvencies: about 4,000 companies in 2024 (-10% year-over-year) and 3,450 cases in 2025 (-14%).
In Poland, insolvencies have mainly affected the smallest companies, with low profitability being the primary cause, not delays in receivables (which are usually a secondary effect). SMEs struggle the most with adjusting to the rising costs of their services or products while benefiting from a unique tool of simplified restructuring.
The prevalence of insolvency in Poland translates into a domino effect risk – the cumulative scale of small firms’ problems could pose a challenge for larger suppliers. Especially since a trend towards concentration and a permanent decrease in the number of Polish firms is realistic: conditions no longer favor self-employment, on the contrary – high demand for labor (record-low unemployment, even by EU standards) not only encourages wage increases for employees but also increases social security burdens for SMEs. Hence, a record number of firms closing or suspending operations – in 2023, there were nearly 600,000, notes Sławomir Bąk, Board Member at Allianz Trade in Poland responsible for risk assessment, claims settlement, and debt recovery.
Insolvency is (already) above pre-pandemic levels in most developed economies
As expected, 2023 saw a rapid and widespread rebound in corporate insolvencies, and 2024 began with insolvencies above pre-pandemic levels in most developed economies. The number of corporate insolvencies increased in three out of four countries in 2023, with most recording double-digit growth. Significant increases were observed in the United States (+40% in 2023) and in the eurozone (+14%), with the Netherlands (+52%), France (+35%), and Germany (+23%) leading the way.
“The global acceleration in the number of insolvencies increased by +6 percentage points in 2023 compared to 2022, only moderated by declines observed in China (-14%) and in emerging markets such as South Africa (-13%) and India (-8%). Western Europe remained a key region contributing to the global increase in corporate insolvencies, despite a slight slowdown (+15% in 2023, -8 percentage points compared to 2022). North America also contributed to the global increase, noting a sharp acceleration (+41%, +43 percentage points). Another concerning factor is the increase in the number of large corporate insolvencies, which can generate further payment default risks for smaller suppliers: in 2023, there was one case per day worldwide (365),” explains Maxime Lemerle, Lead Analyst for Insolvency Research at Allianz Trade.
The global acceleration in insolvencies has not yet been completed, but the catch-up phase is coming to an end
Lower growth, trade disruptions, and geopolitical uncertainty lay the groundwork for another increase in the number of corporate insolvencies worldwide in 2024. Allianz Trade expects a third consecutive escalation this year (+9%), driven by a continuous increase in their number in four out of every five countries. The largest increases are expected in the United States (+28%), Spain (+28%), and the Netherlands (+31%).
“This widespread increase would mean that by the current year, 2024, two-thirds of countries would exceed the number of insolvencies before the pandemic[2]. The market, after so many shocks, carries many adversities and challenges. Companies’ resilience to these challenges will now be under additional pressure, as the experiences of the last 3 years have made them more susceptible and sensitive. We expect that the situation will lead to corporate insolvency stabilizing at a high level in 2025: +12% above the 2019 level in the USA, +8% in France, and +6% in Germany,” states Aylin Somersan Coqui, CEO of Allianz Trade.
Reality check – verification of reality in 5 key areas for companies in the coming years
Allianz Trade does not expect a tsunami of corporate insolvencies like the one following the great financial crisis when the global number of insolvencies abruptly rose by +17% and +19% respectively in 2008 and 2009. However, the catch-up should still be noticeable in several countries, particularly in developed economies in Europe, due to specific companies (most vulnerable to profitability and financing issues) and certain sectors (especially B2C-related services and trade as well as construction).
Allianz Trade identifies therefore 5 reality checks for companies in the coming years:
Profitability is about to decline. Before companies benefit from the global recovery expected in 2025, they will have to cope with a slowdown in global demand. In several countries, the level of activity likely won’t reach the minimum required to at least stabilize the number of insolvencies. According to Allianz Trade, both the eurozone and the United States would need an average of +0.7 percentage points of additional GDP growth in 2024-2025 to stabilize the number of insolvencies.
Uncertainty is increasing: from geopolitics to the rising risk of non-payment. After a series of shocks in recent years, a busy election calendar in 2024 will increase economic uncertainty, as countries accounting for 60% of global GDP go to the polls this year. This complex context complicates business analysis and increases risk calculation in future operations, making it difficult for companies to make accurate forecasts and business plans and causing volatility in input costs. Moreover, the number of regulations is also increasing, which may force companies to undertake additional costly efforts to ensure compliance. Our risk assessment of non-payment based on our own credit exposure shows that companies are increasingly concerned about non-payments, with the indicator at its highest level since 2022.
Financing conditions and liquidity are still under scrutiny. Companies will continue to struggle with the high cost of financing, sustaining concerns about their ability to absorb borrowing costs and not easing pressure on overall profitability. At the same time, limited availability of financing will put at risk the most vulnerable sectors, and the number of unstable (at risk of losing liquidity) companies remains notably significant, including in the UK (15%), France (14%), Italy (9%), and Germany (7%).
New companies will face their first real test of resilience. We expect that the rebound in opening new businesses post-pandemic will increase the “natural” rise in the number of corporate insolvencies. In Europe, 14% more new companies were registered in 2021-2023 than in 2016-2019. For these companies, 2024 will be their first “real” test of resilience, especially in countries where the most have recently been established, particularly in France (+47%), the Netherlands (+28%), and Belgium (+14%).
Some sectors pose a greater risk to employment and the entire economy. Sectors and companies most at risk due to sustained lower demand and prolonged high financing costs are those relying on discretionary spending (manufacturing and retail of non-essential goods, hotels, restaurants, tourism, and other recreational activities) and labor-intensive (construction, road transport, hotels, restaurants, healthcare, certain business services). Construction and real estate, which have already experienced noticeable jumps in the number of corporate insolvencies in Europe and Asia in 2023, will continue to increase their number due to economic cyclicality and demographic reasons. The continuation of the current pace (of insolvencies in these industries) would mean the collapse of over 16,000 companies in France, over 7,000 in the UK, nearly 4,000 in Germany, and 2,000 in Italy.
[1] Companies with annual turnovers exceeding 50 million euros
[2] (2016- 2019 average)
