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Germany: Significantly more company bankruptcies - and the trend is rising

The number of insolvencies in Germany has increased significantly.

Halle (Saale) - In August 2022, the researchers at the Leibniz Institute for Economic Research in Halle (IWH) counted 718 bankruptcies of partnerships and corporations in Germany. That was 26 percent more than in the same month last year. A month ago, the IWH insolvency forecast for August and September predicted a 20 percent increase compared to the previous year.

On the basis of the current figures, the forecast for September has been adjusted slightly upwards: growth of 25 percent compared to the previous year can now be expected. For October, the leading indicators of the IWH point to significantly higher insolvency figures, which will be around a third higher than in October 2021. The analysis also shows that 5,300 jobs were affected in the top 10 percent of companies that filed for bankruptcy in August.

The number of employees affected is thus at the level of the last twelve months. "After a long period of low insolvency figures, a trend reversal has now set in," said Steffen Müller, head of the IWH department for structural change and productivity and the insolvency research based there. Responsible for this are primarily strongly rising prices for important production factors.

While the Ukraine war leads to rising energy costs, disruptions in international supply chains are responsible for the rise in the price of many imported intermediate goods. The turnaround in interest rates announced by the European Central Bank (ECB) will increase companies' refinancing costs. According to the IWH, the increase in the minimum wage from October and high wage demands from the trade unions are likely to further increase wage costs. "The rising insolvency figures show that many companies are expecting permanent cost increases that will make their business model unprofitable," said Müller.

Nevertheless: "Despite the rising numbers, there is currently no talk of an imminent wave of insolvencies."

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