January 15, 2024 | The Halle Institute for Economic Research, IWH, reports rising insolvency figures in Germany. Despite the high values, the scientists consider the situation to be still in normal range.
“The high values in December do not signify the end of rising insolvency figures. We expect further increases in the coming months,” says Steffen Müller, Head of the IWH Department of Structural Change and Productivity, as well as the Insolvency Research unit.
Müller also explains:
“The number of insolvent individuals and capital companies had significantly decreased since the historical highs approximately 20 years ago. Even with a further moderate increase in insolvency figures this year, the insolvency situation would still be within the normal range.”
December marked the highest value of the year 2023
The number of insolvencies among individuals and capital companies saw a significant surge in December, according to the latest analysis from the Leibniz Institute for Economic Research Halle. It marked the highest value for December since the inception of data collection in the IWH Insolvency Trend in 2016. The economists anticipate a further increase in insolvency figures in the upcoming months.
According to Steffen Müller from IWH, the number of insolvencies among companies in Germany reached 1,078 in December 2023 (see Figure 1). This represents a 10% increase compared to November and nearly 25% more than in December 2022.
Insolvencies in Germany of companies with an entry in the commercial register, Sources: Announcements of the insolvency courts, IWH presentation
The insolvency figure was 24% higher than the December average from 2016 to 2019, predating the COVID-19 pandemic.
December marked the highest value of the year 2023. As forecasted by IWH Insolvency Research in late summer, the fourth quarter became the most insolvency-prone quarter of the previous year. Traditionally, the fourth quarter usually has the fewest insolvencies in a year.
Affected employees
Closures of major employers often lead to significant and enduring income and wage losses for the affected employees. The analysis indicates that approximately 9,600 jobs were affected in the largest 10% of companies that reported insolvency in December. The number of affected employees in the largest 10% of companies remains at the level of previous months and that of an average December. Most job losses in December occurred in insolvencies within the industrial sector and business-related services.
The leading IWH early indicators, preceding the insolvency events, reached a new peak for the second consecutive month in December. The institute has been tracking early indicators since January 2020.
“The high values in December do not signify the end of rising insolvency figures. We expect further increases in the coming months,” says Steffen Müller, Head of the Insolvency Research unit. The number of insolvent individuals and capital companies had significantly decreased since the historical highs approximately 20 years ago. Even with a further moderate increase in insolvency figures this year, the insolvency situation would still be within the normal range, explains Müller.
More Information
You can find all underlying data for download in Excel format at iwh-halle.de/iwh-insolvenztrend_daten.xlsx
For more information on IWH Insolvency Research and the methodology behind the IWH Insolvency Trend, visit iwh-halle.de/iwh-insolvenzforschung
