The number of insolvent companies in Poland has risen again

From the start of the year until the end of September, 4,465 Polish companies declared bankruptcy. The Coface company, which prepares a report on this topic every quarter, emphasizes that this is 95% of all businesses that initiated insolvency proceedings in 2023. There are still 3 months left until the end of the year, and experts already predict that by December the number of insolvencies will reach a record high of 5,000. In which sectors was the growth dynamic highest and which industries suffered the most?

Although the Polish economy is currently in a recovery phase, and experts note a growing real increase in GDP, the situation for businesses remains challenging. They are struggling with high fuel and energy prices, significant operating costs, as well as a limited number of orders for export. The economic condition of our trade partners, especially Germany, which remains in recession, also significantly affects our economy. These factors have led to the number of insolvent Polish companies being 23% higher after three quarters of 2024 than after the same period last year. It is also worth noting that, as in previous years, a significant portion of all reported insolvencies are restructuring decisions – accounting for 96% of all insolvent companies.

Construction and transport with high insolvency dynamics

The situation in construction and transport has not changed. As in the second quarter of 2024, these sectors, along with the wood and food industries, are leading in terms of insolvency dynamics.

Experts point out that almost 60% of this year’s insolvency notifications relate to specialist construction. Sole traders, most often those in installation, renovation and general construction, suffered the most. Operating in local markets, they were unable to secure orders of sufficient value, nor generate the necessary resources to continue their business activity. The transport sector is also struggling with problems.

“The situation in transportation is very bad. The share of TSL sector companies in the total number of insolvent entities continues to increase. At the end of 2022, they represented just under 10%, after 2023 – 11.6%, and after three quarters of 2024, their share amounted to 14.2%,” says Barbara Kamińska, Risk Assessment Director from Coface in Poland. “Polish road transport was previously the leader in transport services in Europe. Unfortunately, many sectors in European economies remain in recession or are developing below expectations, which generates lower demand for transport services. Demand-related challenges are just the tip of the iceberg,” she adds.

No major changes in insolvency in terms of regions and legal forms

The third quarter of 2024 does not surprise in terms of the geographical distribution of insolvencies. The top three voivodeships remain the same as in the two previous quarters: Masovian– 818 insolvent companies, Silesian – 586 and Greater Poland – 482. However, there has been a change at the end of the list. Świętokrzyskie voivodeship (79 companies) had the fewest insolvency proceedings in the third quarter, not Opolskie as in previous months.

As in previous quarters and years, the largest number of bankruptcies were recorded among individual entities – entrepreneurs (3243). This was followed by limited liability companies (992), and then limited partnerships (92) and joint-stock companies (70).

What awaits us in the next few months?

The increase in the number of insolvent companies in the third quarter of 2024 is due to both micro and macroeconomic phenomena. Important factors include the level of margins under significant pressure and rising labor costs. However, the situation in foreign markets, especially in Germany, poses the greatest risk to the Polish economy. Poland remains an attractive place for investment, but global economic uncertainty results in a smaller inflow of foreign investment into our country than in previous years.

Considering these factors, economists predict a further increase in insolvency. It is likely to affect around 5,000 companies by the end of the year.

“The dynamics of wage growth will remain positive, but will stabilize at single-digit levels. Investments in fixed assets will have a growing share in economic growth at the expense of private consumption,” predicts Grzegorz Sielewicz, Chief Economist at Coface in Poland and in the Central Europe Region. “A rise in investment, especially from European Union funds, is expected by the construction industry, which has recorded a significant decrease in activity since the beginning of this year. Insolvencies in construction have increased by as much as 47%, and considering that a certain amount of time must pass from tendering to contract performance, this sector will remain one of the unenviable leaders in insolvency proceedings in the upcoming reports,” the expert concludes.

What about the expected economic growth? Although the second quarter of 2024 pointed to a slight recovery, it’s anticipated that the current year will end with a GDP level of 3%. Only in 2025 will the economy somewhat noticeably accelerate.