Download Insolvencies in Europe

Insolvencies
in Europe
2011/12
A survey by the
Creditreform Economic
Research Unit
CONTENTS
PAGE
1
Introduction
1
2
Insolvencies in Western Europe in 2011
2
2.1
Corporate insolvencies
2
2.2
Private insolvencies
8
2.3
Business sector structure of insolvency
3
4
11
Financial and economic environment
16
3.1
Earnings situation
17
3.2
Equity capital situation
18
3.3
Payment conduct
20
3.4
Financing conditions
23
National reports Europe
24
4.1
Germany
24
4.2
United Kingdom
25
4.3
France
26
4.4
Italy
26
4.5
Spain
27
4.6
Benelux countries
28
5
Central and Eastern Europe
29
6
USA
35
7
Summary
37
List of sources
41
g
1
Introduction
The pace of economic growth slowed in 2011,
resulting in a year overshadowed by the European
debt crisis. In Greece, in particular, the crisis assumed such serious proportions that there was a
risk of it spreading to other – basically solvent –
national economies. As a result of sustained tension in the financial markets, both financing conditions and business and consumer confidence in
Europe deteriorated. Coupled with massive austerity programs, these developments curbed the
dynamism of economic activity across Europe.
Within Europe, however, growth varied considerably. Some national economies such as Germany,
Netherlands and Denmark produced growth rates
that were almost as high as before the financial
crisis. On the other hand, countries such as
Greece, Ireland and Portugal registered dramatic
falls. In some cases, worse outcomes were averted only by financial support from the euro bail-out
fund.
Even though the German economy was not immune to these events, it managed to cut loose
and become a kind of economic dynamo for the
eurozone. In the first half of the year, the main
driving force for the German economy came from
sharply rising exports. And although the economy
appreciably lost momentum in the second half of
the year, it proved extremely robust on the whole.
Regarding insolvency figures across Europe, 2011
presents a mixed picture: while the incidence of
insolvency decreased in a large number of core
countries such as Germany and Denmark, the
crisis left its mark on the corporate failure figures
of the periphery.
Insolvencies in Europe, 2011/12
Europa overshadowned by
sovereign debt crisis
EU core and peripheral
countries drift apart
1
g
EU core countries keep
insolvency total in check
Peripheral countries most
strongly affected
2
2
2.1
Insolvencies in Western Europe in 2011
Corporate insolvencies
The European sovereign debt crisis, which had
begun in 2010, continued to cast an ominous
shadow last year, evolving into a full-scale crisis of
confidence. It took firm hold of the European
economy in 2011, and shaped – even if only indirectly – the insolvency scene in the Western European countries (EU-15 plus Switzerland and
Norway). Accordingly, the European insolvency
situation in the second year after the financial crisis was tense. The number of corporate collapses
rose year-on-year by a margin of 0.3 percent –
from 174,463 in 2010 to 174,917 in 2011 (see
Tab. 1). This represents an extremely moderate
increase and so it is actually more appropriate to
talk of stagnation on the insolvency front. All the
same, in any historical comparison, the number of
insolvencies is still at a worrying high level. It is
only thanks to the comparatively positive development in the core European countries that the
insolvency situation has not taken on any more
dramatic form.
The sovereign debt crisis had the peripheral
states of the eurozone firmly in its grip. Greece
had already had to secure massive financial support from the EU in 2010, and in 2011, it was followed by Ireland und Portugal. The precarious
situation of these economies was reflected by the
way insolvency totals developed: Greece, Portugal
and Ireland are among the countries with significant increases in corporate insolvency figures.
There were growing fears that other highly indebted countries such as Spain and Italy would also
be unable to meet their obligations and so they
too were affected. And they were also among the
states whose business communities last year had
to face relatively serious difficulties.
Insolvencies in Europe, Jahr 2011/12
Tab. 1: Corporate insolvencies in Western Europe
g
2011
2010
2009
2008
2007
Change
2010/11
in percent
Austria
6,194
6,657
7,076
6,500
6,362
- 7.0
Belgium
10,182
9,570
9,382
8,476
7,678
+ 6.4
Denmark
5,447
6,461
5,710
3,709
2,401
- 15.7
Finland
3,005
2,864
3,275
2,612
2,254
+ 4.9
France
49,506
51,060
53,547
49,723
42,532
- 3.0
Germany
30,200
32,060
32,930
29,580
29,150
- 5.8
Greece
452
355
355
359
524
+ 27.3
Ireland
1,631
1,525
1.406
773
363
+ 7.0
Italy *)
11,792
10,089
8,354
6,498
5,518
+ 16.9
Luxembourg
961
918
698
590
680
+ 4.7
Netherlands
7,000
7,211
8,040
4,635
4,602
- 2.9
Norway
4,361
4,435
5,013
3,637
2,845
- 1.7
Portugal
6,025
5,144
4,450
3,267
2,123
+ 17.1
Spain
5,752
4,845
4,984
2,528
880
+ 18.7
Sweden
7,177
7,546
7,892
6,298
5,791
- 4.9
Switzerland **)
6,661
6,255
5,215
4,222
4,314
+ 6.5
United Kingdom
18,571
17,468
19,908
16,268
12,893
+ 6.3
174,917
174,463
178,235
149,675
130,910
+ 0.3
Total
*)
Since 2006, the insolvency statistics compiled by the register of companies in Italy include only company headquarters and no longer the
individual branches of a company. **) Since 1.1.2008, companies can
be officially closed down and deleted from the register by means of
bankruptcy proceedings: Section 731b OR.
Admittedly, some national economies, such as
those of Germany and Austria, were able to escape the downward tendencies and generate
strong growth. All the same, the negative repercussions of the loss of confidence and the massive austerity programmes made themselves felt
in all the countries in the EU. Even in those countries with balanced budgets, the national financial
institutions had large holdings of endangered sovereign bonds which created an enormous risk for
the stability of the banking sector.
Insolvencies in Europe, 2011/12
3
Accordingly, European business companies were
last year confronted with perceptibly higher refinancing costs and found it increasingly difficult to
obtain third-party capital. In the end, the European
economy was unable to liberate itself from the
negative influence of the debt crisis. The level of
corporate insolvencies remains high by long-term
standards and the outlook for the coming year is
clouded by considerable uncertainty.
Stability of corporate sector under negative influence
Fig. 1: Development of corporate insolvencies in Western
Europe 2011
30%
25%
20%
15%
10%
5%
Greece
Spain
Portugal
Italy
Ireland
Switzerland
Belgium
Finland
Luxembourg
Total
Norway
Netherlands
United Kingdom
-15%
France
Sweden
Germany
-10%
Austria
-5%
Denmark
0%
-20%
Corporate sector presents
mixed picture
4
A glance at Fig. 1 shows how the differences in
the health of the West European national economies in 2011 were reflected by the differing rates
of change in corporate insolvency totals. Compared with the figures for 2010, Greece (plus 27.3
percent), Spain (plus 18.7 percent), Portugal (plus
17.1 percent) and Italy (plus 16.9 percent) posted
considerable increases. On the other hand, the
number of business failures declined in Denmark
(minus 15.7 percent), Austria (minus 7.0 percent)
Insolvencies in Europe, Jahr 2011/12
and Germany (minus 5.8 percent). This is particularly notable in a period when the debt crisis
sometimes threatened to get out of control and
refinancing terms for business firms had deteriorated massively. Overall, across Europe, the increases and falls in insolvency totals more or less
offset one another, ultimately producing stagnation in aggregate insolvencies in 2011.
Fig. 2: Distribution of corporate insolvencies in Western
Europe
dIn 2011, just as in 2010, French companies accounted for almost three corporate failures in every ten in Western Europe (28.3 percent). In second place, as before, came Germany, with 17.3
percent. The third-highest proportion was posted
by Scandinavia, with 11.4 percent. The Benelux
states (10.4 percent) and the United Kingdom
(10.6 percent) were each responsible for around
one tenth of the total (see Fig. 2).
Compared with the total number of business firms,
the insolvency ratio in 2011 was highest in Luxembourg, with 316 cases for every 10,000 companies. Then, a long way behind, came Denmark,
with 182 collapses (see Fig. 2). Germany, with 84
insolvencies for every 10,000 registered firms,
once again finished in the middle range, but higher than the European average of 68 cases of insolvency. It is notable that in respect of the insolvency ratio, the peripheral eurozone states tend to
perform well. Core countries like Germany, France
(94) and the Netherlands (81), on the other hand,
Insolvencies in Europe, 2011/12
France again registers
highest number of insolvencies
Insolvency ratios low in
the peripheral states
5
post below-average figures or even end up towards the bottom of the table, like Belgium and
Austria, with 132 and 152 cases respectively.
Tab. 2: Insolvency ratios in the individual Western European
countries in 2011
g
Greece
Insolvencies per 10,000
companies
5
Spain
18
Italy
26
Portugal
57
Sweden
68
United Kingdom
81
Netherlands
81
Ireland
82
Germany
84
Norway
90
Finland
94
France
94
Switzerland
118
Belgium
132
Austria
152
Denmark
182
Luxembourg
316
Average
68
Source: National statistics offices
However, these figures need to be treated with
caution, since the depiction is distorted by the fact
that only to a limited extent are the insolvency statistics in the individual European countries comparable with one another. So one reason for the
gradient between the peripheral and the core
countries is that official statistics on the overall
number of business firms in Southern Europe include a large number of small traders and freelance professionals. But these groups only rarely
opt for orderly insolvency proceedings; instead,
they simply give up their business activities (voluntarily). Moreover, there are national specifics to be
taken into consideration which might conceal the
liquidity situation and solvency problems in the
6
Insolvencies in Europe, Jahr 2011/12
corporate sector. Finally, it seems justifiable to
speculate whether the lower insolvency ratio is
connected to a more open-handed lending policy
in these countries.
Tab. 3: Insolvency-related job losses in Europe *)
g
Job losses
(in millions)
2001
1.4
2002
1.6
2003
1.7
2004
1.6
2005
1.5
2006
1.4
2007
1.2
2008
1.2
2009
2.0
2010
1.4
2011
1.5
*) Creditreform estimate
Although it is just modest, the renewed rise in the
aggregate volume of insolvencies in Europe also
impacted on the labour market (see Tab. 3). The
still high number of business failures together with
the increasing incidence of major company collapses with thousands of people being sacked led
to a rise in the number of insolvency-related job
losses. The figure climbed from 1.4 million in 2010
to around 1.5 million last year, corresponding to a
year-on-year increase of 7.1 percent.
Insolvencies in Europe, 2011/12
Slight rise in insolvencyrelated job losses
7
Dark cloud on the horizon
Even though the level of insolvency-linked job
losses may have been only moderate, it is important to look especially at the worsening prospects in the labour markets of such countries as
Greece, Spain and Portugal, where many employees face an uncertain future. After all, there is
usually a time-lag between any crisis and its impact on employment figures. SMEs in particular
generally react to financial market turmoil only late
when it comes to shedding personnel. So it seems
likely that the situation in European labour markets could well deteriorate.
2.2
Fewer private insolvencies
during the crisis
European labour markets
under pressure
8
Private insolvencies
Whereas 2010 had brought a sharp increase in
the number of private bankruptcies, in 2011 – i.e.
at a time when the debt crisis threatened to get
out of control – the number declined. In those
countries which register the relevant data, there
were altogether 1.5 percent fewer private insolvencies than the year before. The total number
was 373,284. In absolute terms, that means that
around 5,800 fewer individuals had to file for
bankruptcy (see Tab. 4).
Overall, the situation in European labour markets
deteriorated in the second half of 2011. The economic slowdown in several upward-striving countries and the structural adjustments necessitated
by the sovereign debt crisis led to a marked
growth in unemployment in a good many parts of
Europe. But alongside irresponsible conduct on
the part of consumers, joblessness is a key factor
boosting over-indebtedness and consequent insolvency. And so, despite the overall picture, the
number of private bankruptcies rose in a good
many European states last year.
Insolvencies in Europe, Jahr 2011/12
Tab. 4: Private insolvencies in Europe
g
2011
2010
2009
Austria
10,861
10,296
10,245
9,561
8,616
+ 5.5
Finland *)
3,531
2,951
2,854
2,851
3,038
+ 19.7
France *)
56,079
44,360
41,045
33,378
27,959
+ 26.4
Germany
129,800
137,780
129,940
126,330
135,600
- 5.8
14,344
11,381
8,966
9,206
14,947
+ 26.0
999
905
995
404
114
+ 10.4
Sweden *)
8,051
7,987
6,589
6,528
6,831
+ 0.8
Switzerland
5,748
5,719
5,691
6,007
6,140
+ 0.5
United Kingdom
143,871
157,712
159,641
127,241
120,775
- 8.8
Total
373,284
379,091
365,966
321,506
324,020
- 1.5
Netherlands *)
Spain
2008
2007
Change
2010/11
in percent
*) Debt relief plan/ rescheduling process
The most marked year-on-year increase in the
numbers of insolvent consumers was registered in
France (plus 26.4 percent), followed by the Netherlands (plus 26.0 percent) and Finland (plus 19.7
percent). Expressed in absolute terms, the number of private insolvencies in these three countries
together increased by around 15,300. As well as
economic factors, something else that probably
also played a role is that consumers sometimes
move to a neighbouring country before filing for
bankruptcy. The chief reason for this kind of "insolvency tourism" is the ongoing lack of any harmonization of insolvency law within the EU. This
creates considerable differences between countries where the course of the bankruptcy proceedings is concerned, especially in respect of the
length of the required period of good conduct until
an individual is freed of his or her residual debts.
The overall decline in the total number of private
insolvencies was fuelled chiefly by the developments in Germany and the United Kingdom: in
these two countries alone, the absolute total of
such cases fell by about 21,820 compared with
2010. The year-on-year decline in Germany was
5.8 percent, with a 2011 total of 129,800 (2010:
137,780). As the 2011 Creditreform Debtor Atlas
shows, the scale of private over-indebtedness in
Insolvencies in Europe, 2011/12
"Insolvency tourism"
Germany and United Kingdom with marked declines
starken Rückgängen
9
Good conduct period in
Germany shortened
Private indebtedness endemic in the UK
10
Germany has decreased in line with the improvement in the labour market and the economy as a
whole. One negative aspect remains: the general
level of consumer bankruptcies remains high. And
it does not seem likely that Germany will be able
to lower this level in the medium term. In fact, the
shortening of the good conduct period from six
years to three may well lead to a marked increase
in the number of private bankruptcies. In fact, the
prospect of a shorter good conduct period might
even be the reason for the reticence shown last
year regarding the opening of court proceedings.
In the United Kingdom, the number of private insolvencies fell by 13,840. That corresponds to a
decline of 8.8 percent – the most marked drop in
any of the European countries. Nevertheless, the
United Kingdom still registered by far the largest
number of private insolvencies in Europe for the
third year in succession, with a total of 143,871
cases (2010: 157,712). The reason for this extremely high level: in the United Kingdom, the idea
of "living on tick" is taken for granted. Hardly any
other industrial country exhibits such a high scale
of indebtedness among private households
(source: OECD). From the historical angle, too,
the British figures are worrying: since 2003
(38,930 cases), the number of private bankruptcies has more than tripled. This rise is due mainly
to a restructuring of insolvency legislation, with the
introduction of new procedures which make it easier for private individuals to file for bankruptcy and
which also considerably speed up the process
through to discharge of residual debt.
Insolvencies in Europe, Jahr 2011/12
2.3
Business sector structure of insolvency
In the period under review, the relative contribution to the European insolvency volume made by
commerce (wholesale/retail including catering/hotels) increased somewhat (see Tab. 5). Just
like the year before, almost one insolvency in every three involved a firm from this branch of the
economy, giving it a share of 31.2 percent, after
30.5 percent in 2010. The construction sector was
also responsible for a bigger proportion of the total
number of corporate insolvencies in Europe: two
out of every ten insolvent firms came from this
sector (2011: 21.4 percent; 2010: 21.0 percent).
The absolute numbers in 2011 were 54,574 business failures in commerce and catering (2010:
53,211) and 37,432 bankrupt building firms (2010:
36,637).
Construction and commerce with higher
shares of total
Tab. 5: Contribution of the key economic sectors to overall
insolvency in Western Europe in 2011
g
Contribution to
insolvency volume
Insolvencies per
10,000 companies
Manufacturing
10.5 (10.9)
61 ( 63)
Construction
21.4 (21.0)
107 (100)
Commerce *)
31.2 (30.5)
89 ( 85)
Services
36.9 (37.6)
49 ( 52)
100.0 (100.0)
68 ( 68)
Total
*) including hotels and catering; figures in percent, ( ) = 2010
Last year saw European industry continue its recovery. The contribution to the overall insolvency
volume in Western Europe made by manufacturing was 10.5 percent, after 10.9 percent in 2010
and 11.4 percent in 2009. This fall in the relative
incidence of corporate collapses was presumably
due to the expanding level of industrial activity and
to the situation on the foreign trade front, enabling
manufacturing to show itself in a relatively good
light. In 2011, only 18,366 industrial firms had to
file for bankruptcy, as against 19,016 in 2010.
Insolvencies in Europe, 2011/12
Lower figures in
manufacturing
11
Fig. 3: Contribution of the key economic sectors to overall
insolvency in Western Europe in 2011
*) including hotels and catering; Source: Creditreform, NACE Rev. 2,
own calculations
Service firms account for
more than one in three insolvencies
Industry with fall in relative
incidence of insolvency
Compared with the previous year, the contribution
made to the Western European insolvency total
by the service sector fell in 2011, and the absolute
number of insolvencies in this sector also declined, from 65,598 to 64,544. Nevertheless, it still
accounted for the biggest share, over one third, of
aggregate insolvency, with 36.9 percent.
Where the structural distribution of the relative
incidence of insolvency is concerned – i.e. the
number of cases of insolvency for every 10,000
firm in the sector – nothing changed much last
year (see Tab. 5). The construction sector is still
the hardest hit, with 107 building firms in every
10,000 going broke. That is actually worse than
the year before, when the figure was 100. The
manufacturing sector posted a slight fall in the
incidence of insolvency: from 63 cases for every
10,000 firms in 2010 to just 61 last year. That result is in line with the reduction of the absolute
number of corporate collapses in industry.
The incidence of insolvency in commerce/catering
was again relatively high last year, with an insolvency ratio of 89 cases for every 10,000 firms.
The 2010 figure was 85. Just as in the previous
two years, the ratio was lowest in the service sector, where just 49 firms in every 10,000 had to file
12
Insolvencies in Europe, Jahr 2011/12
for bankruptcy. That was actually slightly fewer
than the year before (2010: 52).
Regarding the time-line development of the sectoral shares of total insolvency in Western Europe,
it is apparent that there have been changes in the
relationship of the different branches of the economy to one another (see Fig. 4). In 2011, the contribution made by commerce rose to 31.2 percent
after having stagnated the year before. In the
construction sector, too, 2010 had been a year
exhibiting little change. Between 2008 and 2010,
this sector's share was between 20.9 and 21.1
percent; then in 2011 it climbed again to reach a
peak of 21.4 percent.
Post-2010 development
somehwat more dynamic
Fig. 4: Year-on-year changes in contribution to insolvency in
Western Europe by the key economic sectors
*) including hotels, catering; Source: Creditreform, NACE Rev. 2,
own calculations
The relative development of the manufacturing
sector since 2007 shows that – despite all the
prophecies of doom – this sector has in fact been
recovering: last year's share, of 10.5 percent, was
drawing closer to its 2007 level (9.5 percent).
Since 2007, the contribution made by the service
sector had grown continuously, but last year it fell
Insolvencies in Europe, 2011/12
Manufacturing sector
close to 2007 level
13
again for the first time (2011: 36.9 percent; 2010:
37.6 percent).
Service sector hardest hit
in most countries
In most Western European countries, it is the service sector which accounts for the largest proportion of corporate insolvencies (see Tab. 6). Exceptions in this respect are Belgium and France,
where commerce/catering makes the biggest contribution, with shares of 45.8 and 35.3 percent respectively. The recovery in manufacturing referred
to above and shown in Fig. 4 is a phenomenon
that is evident in the insolvency totals of most of
the important European industrial countries. In
Germany, for instance, the contribution made by
manufacturing fell from 9.4 to 8.9 percent, in Italy
from 24.1 to 22.8 percent, in France from 7.7 to
7.5 percent, and in the United Kingdom from 12.5
to 10.7.
Tab. 6: Insolvencies in the key economic sectors in 2011
Manufacturing
g
Construction
Commerce *)
Services
Austria
7.3 ( 7.9) 15.9 (15.4) 35.9 (36.5) 41.0 (40.2)
Belgium
6.4 ( 6.9) 16.7 (16.0) 45.8 (46.7) 31.1 (30.4)
Denmark
8.4 ( 7.8) 14.2 (15.6) 24.7 (22.5) 52.7 (54.1)
Finland
11.9 (12.7) 26.6 (25.8) 26.0 (25.3) 35.5 (36.3)
France
7.5 ( 7.7) 27.0 (28.0) 35.3 (34.2) 30.2 (30.0)
Germany
8.9 ( 9.4) 16.1 (15.9) 30.2 (30.6) 44.9 (44.1)
Ireland
11.5 (10.3) 29.1 (31.0) 35.2 (26.8) 24.2 (32.0)
Italy
22.8 (24.1) 20,6 (18,5) 28.0 (26.2) 28.6 (31.3)
Luxembourg
Netherlands
1.1 ( 1.9)
8.7 (10.0) 26.0 (31.3) 64.1 (56.9)
12.8 (14.0) 15.3 (16.1) 28.9 (27.3) 42.9 (42.6)
Norway
7.6 ( 7.9) 22.9 (24.1) 31.7 (30.5) 37.8 (37.5)
Portugal
23.5 (28.7) 18.7 (19.1) 38.4 (35.3) 19.4 (16.9)
Spain
21.7 (21.4) 34.7 (32.5) 18.7 (19.3) 25.0 (26.8)
Sweden
8.2 ( 8.9) 15.0 (14.3) 29.4 (28.0) 47.4 (48.8)
Switzerland
9.2 ( 9.4) 24.8 (23.3) 19.7 (22.4) 46.3 (44.9)
United
King- 10.7 (12.5) 21.6 (18.5) 23.8 (21.8) 43.9 (47.1)
dom
*) including hotels, catering, figures in percent, ( ) = 2010
14
Insolvencies in Europe, Jahr 2011/12
Although several of the fundamental structures
are apparent across a large number of Western
European states, the insolvency scene nevertheless varies between individual countries, in some
cases quite considerably. The share of the national insolvency total generated by production/processing in Southern Europe, for instance,
is particularly high, something due, among other
things to the exposed situation of agriculture and
the small trades. In Portugal, this sector contributes all of 23.5 percent to the aggregate number
of the cases of insolvency in the country – in other
words, almost one insolvency in every four in Portugal concerns a firm involved in production. The
relevant figures for Spain (21.7 percent) and Italy
(22.8 percent) are also well above the Western
European average in this branch of the economy
(10.5 percent).
In most countries in Western Europe, the insolvency situation in the construction sector has intensified. In the "Big 5", with the exception of
France, the construction sector contributed a larger number of corporate failures than the year before, with a comparatively big increase in the United Kingdom (2011: 21.6 percent; 2010: 18.5 percent). This sector made a particularly high contribution to overall insolvency in Spain (34.7 percent) and in Ireland (29.1 percent) – but the property business is evidently also shrinking its way
back to health in Finland (26.6 percent) and
France (27.0 percent).
Iberian peninsula with big
problems in the production
trades
European property
business shrinking
In many countries, a particularly large number of
bankrupt firms are to be found in the sector commerce/catering. In Portugal (38.4 percent) and
Austria (35.9 percent) but also in France (35.3
percent) and Ireland (35.2 percent), more than
one business collapse in every three involves a
firm in wholesale/retail or catering. In Belgium, the
proportion rises to almost half (45.8 percent).
Insolvencies in Europe, 2011/12
15
Fig. 5: Changes in insolvency in the key economic sectors
*) including hotels, catering, figures in percent
In respect of the rates of change in the incidence
of insolvency in the individual branches of the
economy, the picture is mixed (see Fig. 5).
Whereas the year before, there were declines
across the board, in 2011 only manufacturing/production (minus 3.2 percent) and the service
sector (minus 1.7 percent) registered a negative
change. In contrast, the difficult business situation
in construction and in commerce made itself apparent with increases of 2.2 percent and 2.4 percent respectively, meaning that in these sectors,
the average incidence of insolvency was higher in
2011 than in 2010.
Further declines in manufacturing and services
g
3
Financial and economic environment
The economic development and the financial environment were the main reasons for the upward
trend in insolvency in wide areas of Europe in
2011. The position of the European business
community was adversely affected by an indifferent earnings situation, bad debts, more restrictive
financing conditions and structural deficiencies
(e.g. shortage of equity capital).
16
Insolvencies in Europe, Jahr 2011/12
3.1
Earning situation
An evaluation of the 2010 annual financial statements of about 2.8 million (Western) European
companies reveals that the earnings situation of
European businesses remains under strain (see
Tab. 7). Almost one third of the companies surveyed (29.9 percent) had a negative EBIT margin,
and were thus posting a loss. EBIT – earnings
before interest and taxes – is a turnover-related
indicator of a company's operative profitability. So
almost one in three companies in Europe was definitely in a bad way. The year before, the proportion of companies with a negative earnings margin
had been just 27.8 percent. In addition, the proportion of European firms with an EBIT margin of
between six and 25 percent fell from 30.2 to 28.2
percent. All the same, there was a glimmer of light
on the horizon: in 2010, a larger number of companies achieved an EBIT margin of over 25 percent. The figure in 2009 had been only 13.9 percent, whereas in 2010 16.1 percent of European
firms demonstrated that they are extremely profitable.
Almost one third of firms
with negative earnings
margin
Tab. 7: EBIT margin (in %) of Western European companies
in 2010 *)
g
negative
29.9 (27.8)
up to 5 %
25.7 (28.1)
up to 10 %
12.5 (14.7)
up to 25 %
15.7 (15.5)
more than 25 %
16.1 (13.9)
*) Figures in percent; ( ) = 2009; Source: Creditreform database,
own calculations
Where 2011 is concerned, the earnings situation
of firms in Europe looked set to improve somewhat. Although it will not be possible to evaluate
the EBIT data until the financial statements for
2011 have been published, analysis by the European Central Bank indicates that the earnings position should have brightened slightly (ECB Monthly Reports). In particular the earnings situation of
Insolvencies in Europe, 2011/12
Slight rebound in the
course of 2011
17
non-financial companies developed comparatively
positively in the course of the year.
3.2
Basel III makes equity ratio
even more important
Equity capital situation
A company's equity ratio provides information on
the extent to which its assets are backed by its
own funds. It is measured as a ratio between liable capital and the balance sheet total and forms
a decisive indicator for appraising a firm's solvency and ability to bear risk. Seen from the angle of
a bank, a company's equity capital represents security against credit default. Since it can be assumed that the amended equity capital regulations
laid down in Basel III will have a profound impact
on the equity situation and the business activities
of banks, companies are well advised to attach
even greater importance to having a solid financial
structure in order to be ready for the new requirements.
Fig. 6: Proportion of firms with equity ratio < 10%
*) Figures for 2010 in percent; Source: Creditreform database,
own calculations
18
Insolvencies in Europe, Jahr 2011/12
An analysis of the financial statements from 2010
shows that in particular firms in the peripheral
countries of Europe have a relatively low capacity
for bearing risks (see Fig. 6). In this evaluation of
the equity ratios of 5.8 million companies, ten percent was taken as the threshold indicator for highlighting financing problems in an economy: such
problems are especially apparent in countries
where a large proportion of companies have equity ratios of less than ten percent in relation to the
balance-sheet total, in other words where the national corporate sector is poorly capitalised. This
proportion is particularly high in such peripheral
European countries as Italy (35.4 percent), Ireland
(30.4 percent), Spain (27.6 percent) and Portugal
(26.5 percent).
By the same yardstick, the solvency of firms in
Scandinavia is relatively good. The proportion of
firms there with an equity ratio of less than ten
percent is only around one in five, for instance in
Denmark (18.8 percent), Finland (20.3 percent) or
Sweden (21.1 percent). Companies in the core EU
countries like Germany (22.2 percent) and France
(20.4 percent) are also relatively well capitalised.
On average in Western Europe, 25.9 percent of all
business companies have an equity ratio of less
than ten percent, meaning that one quarter of all
business enterprises are under-capitalised and
thus have only a relatively low credit-standing.
These firms tend to have a greater number of
creditors and are likely to have occasional problems concerning refinancing. So in the era of Basel III, a considerable proportion of European
business firms will have to strengthen their equity
basis to avoid endangering their chance of obtaining follow-up financing, which would put their stability at risk.
Insolvencies in Europe, 2011/12
Poor equity ratio in the peripheral countries
Core countries and
Scandinavia stable
Probably one firm in every
four faced with refinancing
problems
19
3.3
Payment conduct
A basic distinction between peripheral states on
the one hand and core and Scandinavian countries on the other also needs to be made in respect of the time taken to settle invoices. The
analysis here is based on the average days sales
outstanding (DSO), which shows how quickly bills
are paid after goods have been exported to particular countries.
Core and Scandinavian
countries pay invoices
fastest
Eastern European countries with average payment
conduct
A glance at Fig. 7 shows just how much the payment conduct of companies varies between the
different European countries. Almost threequarters of German firms (72.3 percent) exporting
goods to Austria or Switzerland, for instance, receive payment within a month. Invoices issued to
customers in other European core nations are also paid relatively quickly. Firms in Benelux countries, for example, settle bills sent to them by
German exporters within 30 days in 57.9 percent
of all cases. At the other end of the scale are peripheral states like Spain and Portugal. Only in two
cases out of every ten (20.0 percent) does a German company exporting goods to these countries
receive payment within one month. The situation
regarding Italian customers is similar (20.1 percent). Where payment conduct is concerned, the
Eastern European countries tend to occupy a midfield position. For instance, 42.4 percent of German firms exporting goods to Poland report receipt of payment within 30 days.
German companies which export goods to Italy
have to wait an extremely long time before they
are paid. Almost half of all firms (46.3 percent)
report waiting periods of over two months. A similar waiting period is experienced by 29.3 percent
of German exporters shipping goods to Spain and
Portugal. More than one in four German firms
(27.1 percent) has to wait over 60 days for payment if it sends merchandise to Romania, Bulgaria or Croatia.
20
Insolvencies in Europe, Jahr 2011/12
Fig. 7: Collection periods in Europe (data in percent)
Source: Creditreform
The situation regarding payment delays in Europe
is similar to the picture outlined above of payment
conduct in the context of actual payment terms
(see Fig. 8). Export-oriented German companies
have extremely bad payment experiences in relation to the Mediterranean countries. Over one
quarter of all firms (25.2 percent) report that in the
case of goods sent to Italy, they are still waiting for
their money a month after the payment deadline
has passed. Things are not much better where
Spain or Portugal is concerned: customers there
are also tardy payers. 23.4 percent of all firms with
business relations in these two countries complain
of agreed deadlines being exceeded by 30 days.
Similar problems arise in trade with Eastern Europe. Only one exporter in every ten has no complaints to make about payment arrears after sending goods to countries like Romania and Croatia
(10.6 percent), the Czech Republic or Hungary
(10.7 percent). French customers also tend to wait
a considerable time after the payment deadline
has expired before settling their invoices. 15.1
Insolvencies in Europe, 2011/12
Italians over-run the longest
21
percent of German firms with dealings in France
report payment delays of more than 30 days.
Excellent payment conduct
in Switzerland
The heart of Western Europe presents a totally
different picture, with Austria and Switzerland in
particular standing out positively from the rest of
the field. German exporters with business relations in these countries are spared payment delays entirely in more than three out of every ten
cases (35.3 percent). Customers in the Benelux
countries are also relatively good debtors. Almost
a quarter of German firms (23.3 percent) exporting
goods to these countries do not experience any
payment delays.
Fig. 8: Payment delays in Europe (in percent)
Source: Creditreform
22
Insolvencies in Europe, Jahr 2011/12
3.4
Financing conditions
Financing terms in Europe deteriorated considerably in the course of 2011. Whereas in the first
half of the year, lending conditions for business
enterprises were tightened only slightly, from the
third quarter onwards there were growing concerns regarding the debt situation in the eurozone
grew and this was accompanied by a weakening
of the European banking sector. In particular,
banks holding large quantities of the sovereign
bonds of the highly indebted European countries
found themselves confronted by growing refinancing costs and liquidity problems. Accordingly, bank
in the eurozone tightened their credit terms for
business companies and increased their interest
rates (European Central Bank, Euro Area Bank
Lending Surveys).
In the wake of the euro crisis, the signs point towards an upcoming credit squeeze in the countries of Central and Eastern Europe, whose economies are anyway developing far worse than expected. The generally weakened European banking sector and the correspondingly more difficult
refinancing environment could aggravate a possible downturn in Central and Eastern Europe, since
approx. 80 percent of the foreign liabilities there
relate to eurozone banks. In several countries,
such as Romania, the Czech Republic, Hungary
and Croatia, Western European banks are so
strongly committed that they are of systemic significance for the relevant national financial systems (Bank for International Settlements, quarterly
reports).
The financing environment in Germany, on the
other hand, can be seen as relatively relaxed.
German banks are admittedly more reticent than
before about lending money but there is no danger of a credit crunch.
Insolvencies in Europe, 2011/12
Tight credit terms
in Europe
Credit squeeze imminent
in Eastern Europe
Financing environment in
Germany relatively good
23
g
Third-lowest insolvency
total since 2001
4
4.1
National reports Europe
Germany
In 2011, the German economy once again developed vigorously. With growth of around three percent, Germany functioned once more as the economic dynamo of Europe. This growth was fuelled
above all by private consumer expenditure and a
robust scale of investment. Unemployment, at less
than seven percent, was relatively low by previous
standards. This good economic situation impacted
positively on the insolvency scene (see Tab. 8).
The number of corporate insolvencies in 2011 totalled 30,200. That is the third-lowest level since
2001 and corresponds to a year-on-year fall of 5.8
percent (2010: 32,060).
Tab. 8: Insolvencies in Germany
g
Total
Companies
Private individuals
Manufacturing and
construction benefit
strongly from upswing up-
Negative outlook in the
field of private bankruptcies
24
2011
2010
Change in %
160,000
169,840
- 5.8
30,200
32,060
- 5.8
129,800
137,780
- 5.8
The most marked decline in insolvency figures
was registered by the manufacturing sector, with a
clear-cut reduction of 14.1 percent. Another beneficiary of the upswing was construction, where the
number of insolvencies dropped by an exceptionally high 13.3 percent. At the same time, the extent of major insolvencies was limited. By far the
biggest was the collapse of printing press manufacturer manroland AG, with 6,500 people on its
payroll. Other prominent corporate bankruptcies
were Sellner GmbH, with around 1,600 employees, and the Schlott Group, with a workforce of
around 1,480.
Less pleasing was the situation in the field of private insolvencies. Even though here, too, the total
fell – by 5.8 percent to 129,800 (2010: 137,780) –,
it still reached its third-highest level since 1999.
Another factor here is that many private individuals probably delayed filing for bankruptcy in anticiInsolvencies in Europe, Jahr 2011/12
pation of the shortening of the period of good
conduct expected in 2012. This is likely to produce
a grave increase in private insolvencies in this
present year once the procedure for residual debt
relief is speeded up.
4.2
United Kingdom
The economic recovery in the United Kingdom in
the past twelve months has been somewhat meagre, with growth of just 0.6 percent. The outlook,
with an IMF forecast of 0.9 percent, is not much
brighter, either. Domestic consumption is held
back by restrictive lending policies, "financial restructuring" in private households and the country's tighter financial policies. Nor is any real improvement in the labour market in sight – the unemployment rate is around the 8 percent mark.
The number of corporate insolvencies rose according, by 6.3 percent (see Tab. 9) from 17,468
in 2010 to 18,571. The biggest proportion of aggregate insolvencies was registered by the service
sector, with an exceptional 43.9. Real estate and
property were particularly hard hit.
Difficult economic situation boosts corporate insolvency numbers erneh-
Tab. 9: Insolvencies in the United Kingdom
g
Total
Companies
Private individuals
2011
2010
Change in %
162,442
175,180
- 7.3
18,571
17,468
+ 6.3
143,871
157,712
- 8.8
Despite the still high jobless total and the high
level of over-extended households, the number of
private insolvencies fell by 8.8 percent last year to
143,871 (2010: 157,712). Any rejoicing is likely to
be short-lived, though, because the scale of private indebtedness in the United Kingdom remains
extremely high, and the situation is actually likely
to be aggravated by such adverse factors as the
sluggish economy and the ongoing decline in
property prices.
Insolvencies in Europe, 2011/12
Brief respite in field of
private insolvencies
25
4.3
Boom for debt clearance
procedure
France
In view of the fact that 2012 is set to be a year of
stagnation for France (IMF forecast), the 1.6 percent economic growth achieved in 2011 looked
like relatively good news. The French government
faces the difficult job of finding the right balance
between stricter budgetary consolidation and the
need to promote growth. Unemployment has
reached a worrying level, with a rate of over nine
percent. Together with the increasing trend for
consumers from neighbouring countries to opt for
insolvency proceedings in France, this has led to
a substantial leap in the number of private individuals taking advantage of the French debt clearance procedure (Procédure de Rétablissement
Personnel) (see Tab. 10). The number of people
filing for private bankruptcy in 2011 rose by a remarkable 26.4 percent, from 44,360 to 56,079.
Tab. 10: Insolvencies in France
g
2011
2010
Change in %
105,585
95,420
+ 10.7
Companies
49,506
51,060
- 3.0
Private individuals
56,079
44,360
+ 26.4
Total
Decline in French corporate insolvency figures
The development of corporate insolvencies, on
the other hand, was far more positive. In absolute
terms, the number fell from 51,060 cases in 2010
to 49,506 in 2011. That corresponds to a decline
of 3.0 percent. The share generated by the construction sector was above-average (27.0 percent), while the largest number of business failures was registered in the field of commerce and
catering, with 35.3 percent of the total.
4.4
Structural bottlenecks in
Italy
26
Italy
In 2011, the economy in Italy suffered from the
repercussions of the European debt crisis, especially the increase in refinancing costs. Even
though the economy in Italy is not in such poor
condition as that in Greece or Portugal, the finan-
Insolvencies in Europe, Jahr 2011/12
cial markets fear that Italy will not be in a position
to completely repay its substantial debts. Economic growth last year was just 0.4 percent and in
view of structural bottlenecks it is likely to remain
low for some time to come. The labour markets
remain weak and sovereign debt rose in 2011 to
around 120 percent of GDP. The International
Monetary Fund forecast for Italy in 2012 is of negative growth of 2.2 percent.
Tab. 11: Corporate insolvencies in Italy
g
2011
2010
Change in %
11,792
10,089
+ 16.9
Against this background, there was a renewed
year-on-year increase of 16.9 percent in the total
number of corporate insolvencies (see Tab. 11).
The figure rose from 10,089 to 11,792. The biggest contribution to the total was made by the service sector, with a share of 28.6 percent, closely
followed by commerce/catering, with 28.0 percent.
4.5
Spain
Spain was among the European countries worst
hit by the 2007-09 financial crisis. In addition, the
country's economy is now suffering enormously
from the impact of the European sovereign debt
crisis. Together with the high budgetary deficit and
the growing costs of debt refinancing, Spain's biggest problem is the high level of joblessness. In
the course of last year, the unemployment rate
touched almost 23 percent at times and the figure
at the end of the year was over 20 percent. The
sovereign debt crisis is continuing to exert massive pressure on the Spanish government and the
country's economy. The wide-ranging package of
economic policy measures initiated by the government will probably not be able to prevent the
country's GDP – which grew by 0.7 percent in
2011 – from shrinking in 2012 (IMF forecast).
Insolvencies in Europe, 2011/12
Spain especially hard hit
by financial and debt crisis
27
Tab. 12: Corporate insolvencies in Spain
g
Bloated construction sector boosts number of insolvencies
Insolvencies in Luxembourg at record level
28
2010
Change in %
5,752
4,845
+ 18.7
In an effort to regain the confidence of the financial markets, Spain is demonstrating fiscal moderation. Between 2009 and 2010, it already reduced
its deficit from 11.1 to 9.2 percent, and the reduction is likely to have continued last year. But the
austerity measures and the tense economic situation in Europe is imposing a strain on Spanish
business. In particular the construction and property sector is still bloated, highly indebted and
heavily dependent on third-party capital. Accordingly, the number of corporate insolvencies in
Spain rose by 18.7 percent compared with 2010
(see Tab. 12). The total increased from 4,845
cases in 2010 to 5,752 in 2011. The construction
sector's share of this total was disproportionately
high. Whereas in Europe as a whole, this sector
accounted for an average of 21.4 percent of aggregate insolvencies, in Spain the figure was 34.7
percent.
4.6
Netherlands with fewer
business failures
2011
Benelux countries
The insolvency situation in the Benelux countries
exhibited differing trends (see Tab. 13). The
Netherlands excelled, with a decline of 2.9 percent
in the number of corporate insolvencies. This fell
from 7,211 to 7,000. Neighbouring Belgium performed far worse; there, the number of firms having to make their way to the bankruptcy courts
rose from 9,570 to 10,182. That is equivalent to
an increase of 6.4 percent. Luxembourg, where
the insolvency total had already climbed by a remarkable 31.5 percent between 2009 and 2010,
set a new negative record in 2011. Year-on-year,
aggregate business collapses increased by a further 4.7 percent to 961 cases (2010: 918). In Luxembourg and the Netherlands, it was the service
sector which was hardest hit, with shares of 64.1
and 42.9 percent respectively. In Belgium, this
Insolvencies in Europe, Jahr 2011/12
sector accounted for only 31.1 percent of the total,
and the insolvency scene there was dominated by
commerce and catering, with 45.8 percent of all
corporate insolvencies.
Tab. 13: Corporate insolvencies in the Benelux countries
g
2011
2010
Change in %
10,182
9,570
+ 6.4
Netherlands
7,000
7,211
- 2.9
Luxembourg
961
918
+ 4.7
Belgium
In the Netherlands, statistics also cover private
bankruptcies. These rose sharply, by 26.0 percent, from 11,381 cases to 14,344. Just like
France, the Netherlands has a procedure which
enables private individuals to free themselves
from their debts after just a relatively short good
conduct period. Alongside economic factors,
something which could have played a role in the
rise in the insolvency total is the fact that consumers from neighbouring countries move to the
Netherlands to take advantage of this procedure.
g
5
Central and Eastern Europe
Overall, the economic development in Central and
Eastern Europe was very modest. The economic
environment in the individual countries was influenced substantially by the debt crisis and its repercussions in the nations of Western Europe. In
view of the imminent credit squeeze (see also
Section 3.4), the situation is generally speaking
extremely tense and in connection with a net capital outflow could lead in the course of 2012 to a
serious slump in growth or even a recession
(EBRD).
Economic situation in Central and Eastern
Europe tense
The third quarter of 2011 brought an outflow of
capital from the CEE region for the first time since
2009: banks in Western Europe – faced by growing refinancing problems – set out to reduce their
debts in order to strengthen their equity ratios.
Since a large proportion of the financial assets in
Insolvencies in Europe, 2011/12
29
the Eastern European banking sector is foreignowned and the CEE banks are dominated by
Western European financial institutes, this had
earnest consequences for the Eastern European
financial system.
Banking system integration causes big problems
for CEE countries
Another sizeable rise in
corporate insolvencies
Although the strong presence of foreign financial
institutes is generally seen as having a positive
influence, the difficult situation confronting Western European parent banks impaired their ability
to support subsidiaries in restructuring their balance sheets. This led to stricter lending standards
and fewer loans, which ultimately had the effect of
slowing down economic growth in the CEE region.
Naturally enough, the extremely difficult financing
environment inflicted wounds on the business
community and was ultimately also reflected in
last year's corporate insolvency figures (see Tab.
14). Following the massive rise of 14.1 percent
between 2009 and 2010, 2011 brought another
marked increase, of 6.1 percent altogether. In absolute terms, the number of CEE firms having to
file for bankruptcy climbed from 37,139 in 2010 to
39,423 last year. But there were also declines.
The biggest were those registered by the Baltic
states of Estonia (minus 49.2 percent) and Latvia
(minus 66.8 percent) and by Romania (minus 16.4
percent). At this point, mention must be made of
the exemplary performance of Latvia, which in the
past few years has provided a convincing demonstration of the art of debt reduction. The excellent
management of the country's finances has now
led to fewer cuts in state demand – with highly
positive effects for local businesses.
Despite all the euphoria regarding such marked
falls in insolvency totals, it should not be forgotten
that the relevant legislation varies considerably
between the different countries of Central and
Eastern Europe. So comparing the insolvency figures of one country with those of another is anything but easy; caution is required in interpreting
the sets of figures.
30
Insolvencies in Europe, Jahr 2011/12
In Hungary, the insolvency situation is worrying,
with growth of 16.2 percent in the total number of
corporate failures. Although it must be borne in
mind that in Hungary the insolvency statistics include company liquidations as well as the registered bankruptcies of going concerns, the increase in the number of corporate insolvencies
from 17,487 to 20,322 is alarming. One reason for
the grave condition of the Hungarian business
sector is the instable exchange rate of the forint.
While business firms invoice their domestic customers in forints, they generally have to pay their
bills in foreign currency. Another factor is that the
debts of both companies and private individuals
are often in a foreign currency – for some years,
the prime interest rate in Hungary was higher than
that in neighbouring countries, which made foreign-currency loans comparatively attractive, but
then in the wake of the economic crisis, the value
of the forint fell considerably, thus increasing interest costs quite substantially.
Hard times in Hungary
Tab. 14: Corporate insolvencies in Central and Eastern Europe
g
2011
2010
Bulgaria
1,500
700
+ 114.3
Croatia
1,450
1,501
- 3.4
Czech Republic
6,753
5,559
+ 21.5
256
504
- 49.2
20,322
17,487
+ 16.2
800
2,407
- 66.8
1,512
1,496
+ 1.1
705
665
+ 6.0
Romania
4,580
5,480
- 16.4
Slovakia
870
830
+ 4.8
Slovenia
675
510
+ 32.4
39,423
37,139
+ 6.1
Estonia
Hungary *)
Latvia
Lithuania
Poland
Total
Change
2010/11 in %
*) Bankruptcies and other liquidations
There have been marked rises in corporate insolvency totals especially in the Czech Republic and
Slovenia. Even though many firms in the Czech
Republic had a growing order intake and the eco-
Insolvencies in Europe, 2011/12
Czech Republic and Slovenia also face serious
problems
31
nomic situation in the business sector had largely
stabilised after the financial crisis, the number of
company collapses there rose to 6,753 in 2011,
after 5,559 the year before. That represents an
increase of 21.5 percent. Higher totals were also
registered in Slovenia (plus 32.4 percent) and Poland (plus 6.0 percent). In Slovenia, it was above
all the timber industry which came in for a terrible
battering in 2011, with a series of large firms in
this sector going bankrupt.
Russia registers decline
The growth of insolvencies in Poland, on the other
hand, was only moderate in 2011. Economically,
Poland is one of the best-positioned of the CEE
countries. In Russia – whose insolvency figures
have been included in this survey only since last
year – the situation improved considerably in 2011
(see Tab. 15). The number of corporate failures
fell by 20.1 percent to 12,794 (2010: 16,009).
Tab. 15: Corporate insolvencies in Russia
g
Where they are possible,
private bankruptcies rise
drastically
Third of all insolvencies
involve firms in commerce
32
2011
2010
Change in %
12,794
16,009
- 20.1
In most Eastern European countries, there are still
no possibilities for private individuals to obtain
debt relief via orderly bankruptcy proceedings.
Insolvency legislation in Croatia, Lithuania or Romania, for instance, contains no stipulations allowing over-indebted consumers to file for bankruptcy. But in those countries where a judicial option
of this kind does exist, it was used extensively. In
the Czech Republic, the number of private insolvencies rose dramatically – from around 10,600 in
2010 to 17,600 in 2011, an increase of 66.7 percent. Similar increases in cases of private bankruptcy were registered in Latvia (from 246 to 810)
and Slovenia (from 80 to 13).
Unlike in Western Europe, the biggest proportion
of corporate insolvencies in Central and Eastern
Europe were not in the service sector but in
commerce and catering (see Fig. 9), which
Insolvencies in Europe, Jahr 2011/12
accounted for more than one business failure in
every three (37.0 percent). The share generated
by services, on the other hand, was 28.2 percent.
The contribution made by manufacturing companies was relatively high, with one in every five insolvent enterprises (19.2 percent). 15.6 percent of
all corporate failures were in the construction sector.
Fig. 9: Contributions to insolvency in Central and Eastern
Europe in 2011 by the key economic sectors
*) incl. hotels, catering; Source: Creditreform
The development since 2009 shows that the incidence of insolvency is still highest in the field of
commerce/catering and has not changed much in
that period – just from 37.4 to 37.0 percent in
2011 (see Fig. 10). The way in which the contribution of the manufacturing sector has developed
provides a clear indication of the scars inflicted by
the slow-down in economic growth. Last year, this
sector's share rose to 19.2 percent, up from 15.1
percent in 2009 and 15.2 percent in 2010. The
share of total insolvency generated by the service
sector is gradually declining; it 2011 it was just
28.2 percent (2010: 31.1 percent, 2009: 33.6 percent). The situation regarding construction is that
after increasing from 14.5 to 16.3 percent between 2009 and 2010, it last year fell again
somewhat, to 15.6 percent.
Insolvencies in Europe, 2011/12
Downward trend in
service sector
33
Fig. 10: Changes in shares of total insolvency generated by
the key economic sectors in Eastern Europe (in %)
*) incl. hotels, catering; Source: Creditreform, NACE Rev. 2,
own calculations
Not all CEE countries publish statistics on the
number of insolvency-related job losses. In the
case of some countries there, though, it was possible to obtain the relevant figures. These were
the Czech Republic (52,000), Hungary (50,000),
Poland (43,500), Bulgaria (15,000), Latvia (8,000),
Slovenia (2,500) and Estonia (1,500). Using these
figures as a yardstick for the CEE region as a
whole, it can be estimated that the number of
people made jobless when their employers went
broke totalled around 230,000 in 2011. That is an
increase on the year before (2010: 200,000),
when, however, Bulgaria was not included in the
calculation.
Poor prospects for
Eastern Europe
34
The forecasts for 2012 are not bright. A further
deterioration of the situation in the euro area coupled with intensified debt reduction on the part of
Western European banks could confront Central
and Eastern Europe with systemic financial problems – with dire consequences for growth in the
region and for the insolvency scene. Any recesInsolvencies in Europe, Jahr 2011/12
sion in the eurozone would probably result in far
weaker development of the Eastern European
export markets and impact heavily on overall economic growth there. Erik Berglöf, chief economist
of the EBRD, is currently forecasting CEE growth
of 3.1 percent. The prospects are particularly dismal for countries like Slovenia and Hungary,
which will probably slip into recession. In contrast,
economies which are less tightly tied to Western
Europe could develop relatively positively.
g
6
USA
In 2011, the US economy tried to find a firmer
foothold but had to cope with mainly modest
growth and a fragile labour market. One worrying
feature of the year was the inability to reach political agreement on reducing American sovereign
debt. The meagre budgetary prospects resulted in
a downgrading of the USA's credit-standing. US
bonds now no longer have the top possible rating
but are classed as AA+. Since there is a considerable degree of uncertainty regarding any future
consolidation of the US budget, rating agencies
view the outlook as negative.
US credit-standing
downgraded
In the first half of last year, the recovery of the
American economy continued – but then received
a hard blow as a result of the disastrous natural
catastrophe in Japan which impacted severely on
the US automotive industry in particular. After registering growth of 0.4 and 1.3 percent in the first
and second quarters, the economy picked somewhat during the second half of the year. Higher
consumer expenditure and increased investment
produced Q3 growth of 1.8 percent, followed in Q4
by a sharper rise to 2.8 percent.
Although towards the end of the year there were
signs of a moderate improvement in the labour
market situation, the unemployment rate looks set
to remains relatively high in 2012, with around 8.2
to 8.5 percent.
Insolvencies in Europe, 2011/12
US labour market still
under strain
35
Tab. 16: Insolvencies in the USA
g
Total
Companies
Private individuals
Fall in private bankruptcies...
...with a further decline forecast
Only 48,500 companies
insolvent in 2011
36
2011
2010
Change in %
1,459,500
1,593,081
- 8.4
48,500
56,282
- 13.8
1,411,000
1,536,799
- 8.2
Against the backdrop of an unemployment rate
which is high by US standards, American citizens
seem to have realized that they cannot maintain
their substantial level of indebtedness for ever.
Accordingly, 2011 was distinguished primarily by a
reduction in the debts of private consumers.
Whereas the number of private insolvencies had
risen continuously from 2006 onwards, this development now appears to be slowing down (see
Tab. 16). In fact in 2011, 8.2 percent fewer private
bankruptcy proceeding were opened, with around
1.41 million US citizens declaring themselves
bankrupt after about 1.54 million the year before.
Although both the labour market and the property
market – where the financial crisis of 2007-09
originated – remain under pressure, a further improvement in the field of private insolvencies is
anticipated. For instance, Samuel Gerdano, Executive Director of the American Bankruptcy Institute, expects to see US consumers continue to
reduce their debts, with the result that in 2012 the
number of private bankruptcies will go on falling.
The insolvency situation in the business sector
developed in equally positive fashion last year.
Business recovery continued, something reflected
for example in the rise in corporate investment in
the second half of 2011. Correspondingly, the
number of corporate insolvencies dropped. Just
48,500 firms had to make their way to the insolvency courts in 2011, as against 56,282 the year
before. That is equivalent to a reduction of 13.8
percent. It is gratifying to note that this positive
development is continuing and even apparently
picking up speed – the prior-year total already represented a decline of around six percent in corporate collapses.
Insolvencies in Europe, Jahr 2011/12
Despite the upward tendencies depicted here, the
outlook for 2012 is subdued. Speaking at the beginning of this year, US Secretary of the Treasury
Timothy Geithner confirmed that it would take the
country a lengthy period of time to fix the damage
caused by the latest financial crisis. Accordingly,
the Federal Reserve Bank recently announced
that it will probably leave the prime interest rate at
its present exceptionally low level until 2014. The
Fed funds rate currently lies between 0.0 and 0.25
percent.
g
7
Subdued outlook – prime
rate to maintain record low
until 2014
Summary
Economic activity in Europe was dominated in
2011 by the European debt crisis. In the EU-15
plus Norway and Switzerland, the impacts of the
crisis were clearly apparent. The number of corporate insolvencies rose to 174,917 in 2011. This
reflected a marginal increase of 0.3 percent
against the prior year, when 174,463 businesses
were hit by insolvency. In historical terms, the insolvency total is still at a worryingly high level. The
fact that the insolvency situation did not assume
more dramatic proportions last year was due only
to the comparatively positive developments in the
core European countries.
In Western Europe, a clear trend is emerging in
the pattern of insolvency. Indeed, it is almost possible to say that Western Europe is divided into
two parts. While developments in the business
sectors and the corresponding insolvency figures
in core countries such as Germany (30,200 cases;
minus 5.8 percent), France (49,506 cases; minus
3.0 percent), Denmark (5,447 cases; minus 15.7
percent) and the Netherlands (7,000 cases; minus
2.9 percent) were relatively positive, the situation
on the periphery, in Greece (452 cases; plus 27.3
percent), Spain (5,752 cases; plus 18.7 percent),
Italy (11,792 cases; plus 16.9 percent) and Portugal (6,025 cases; plus 17.1 percent) was poor.
The problems and impact vectors are certainly a
great deal more complex and convoluted. Never-
Insolvencies in Europe, 2011/12
37
theless, the present economic situation in the
shadow of the debt crisis seems almost to mirror
the present insolvency situation across Europe. It
is particularly noticeable that the economies worst
affected – Greece, Spain, Italy, Portugal and Ireland – are the ones that fare worst in the corporate insolvency statistics for Western Europe.
The branch of the economy accounting for the
largest share of insolvency was the service sector.
Service providers made up 36.9 percent of all registered insolvencies, retaining their top-of-thetable position with approximately 65,598 reported
corporate failures. In second place came commerce and catering with around 54,574 insolvent
businesses, which was 31.2 percent of the total. In
the construction sector, more than one in five enterprises (21.4 percent) filed for bankruptcy – a
total of 37,432 building firms. One in ten insolvencies (10.5 percent) involved a manufacturing enterprise – 18,366 businesses in absolute terms.
Downturns in insolvency figures were noted in
manufacturing (minus 3.2 percent) and services
(minus 1.7 percent) while upturns due to the difficult economic climate were seen in the construction sector (plus 2.2 percent) and commerce (plus
2.4 percent).
The worsening of the insolvency situation in Europe impacted on insolvency-related unemployment. The number of jobs threatened by insolvency in 2011 increased by 7.1 percent to 1.5 million
(2010: 1.4 million). The sustained high level of
insolvency overall and the growing number of major corporate failures involving thousands of dismissals led to an increase in insolvency-related
job losses.
The private insolvency situation eased moderately. While 2010 saw a marked rise in the number of
insolvency cases involving private individuals, the
figure in 2011 was recessive. In the countries that
collect private insolvency data, a total of 373,284
private insolvency proceedings were recorded –
38
Insolvencies in Europe, Jahr 2011/12
1.5 percent fewer than the year before. In absolute terms, this means around 5,800 fewer persons were registered as insolvent. Sharp rises in
private insolvency were noted in France (56,079
cases; plus 26.4 percent), the Netherlands
(14,344 cases; plus 26.0 percent) and Finland
(3,531 cases; plus 19.7 percent). Although the
biggest contributors to private insolvency were
Germany and the UK, the figures in both these
countries were lower than in 2010. While the
number of private insolvencies in Germany fell by
5.8 percent (129,800 cases), the UK registered
13,841 fewer cases (143,871 cases; minus 8.8
percent).
An appreciable rise (plus 6.1 percent) was seen in
the number of corporate insolvencies in Central
and Eastern Europe. After 37,139 corporate failures in 2010, last year produced a total of 39,423
cases. The sharpest increases were noted in Bulgaria (1,500 cases; plus 114.3 percent), Hungary
(20,322 cases; plus 16.2 percent), Czech Republic (6,753 cases; plus 21.5 percent) and Slovenia
(675 cases; plus 32.4 percent). Notable downturns
in corporate failure were registered in Romania
(4,580 cases; minus 16.4 percent), Lithuania (800
cases; minus 66.8 percent) and Estonia (256 cases; minus 49.2 percent). The largest sectoral contributors to insolvency figures were commerce and
catering (37.0 percent) and services (28.2 percent). Manufacturing and construction accounted
for smaller shares of 19.2 and 15.6 percent respectively.
The prospects for 2012 are clouded. Major Western European economies – including Spain and
Italy – are expected to slip into recession. Even in
Germany, the economic recovery will peter out
(0.7 percent; Federal Economics Ministry), a further fall prevented only by robust domestic demand. And while the credit squeeze now seems to
have reached Central and Eastern Europe, fears
of a credit crunch are widespread in Western Europe. In some national economies, lending ap-
Insolvencies in Europe, 2011/12
39
pears to be severely disrupted at present. Under
these auspices, corporate insolvency is expected
to rise again this year – at a significantly sharper
rate than in 2011. How steeply the number of corporate insolvencies increases depends largely on
how swiftly policy makers get to grips with the
sovereign debt crisis. If the crisis is not under control by the summer, serious consequences are
anticipated for corporate borrowing, economic performance and insolvency.
Responsible for the content:
Creditreform Economic Research Unit
Head: Michael Bretz, tel.: (02131) 109-171
Editor: Dr. Benjamin Mohr, tel.: (02131) 109-172
Hellersbergstr. 12, D - 41460 Neuss
All rights reserved
 2012, Verband der Vereine Creditreform e.V.,
Hellersbergstr. 12, 41460 Neuss
With the exception of fair use for journalistic or
scientific purposes, no part of this survey may be
reprinted or reproduced in any form without the
express permission of the publishers.
Licensing by arrangement with the publishers.
Neuss, 07 February 2012
40
Insolvencies in Europe, Jahr 2011/12
List of sources
Austria:
Creditreform Austria, Vienna
Österreichisches Statistisches Zentralamt
Belgium:
StatBel Institut National des Statistique, Brussels
Graydon Belgium NV
SPF Economie, P.M.E.
Denmark:
Danmarks Statistik, Copenhagen
Finland:
Statistikcentralen Finland, Helsinki
France:
INSEE, Institut National de la Statistique et des Etudes Economiques
Banque de France
Germany:
Verband der Vereine Creditreform e.V.
Statistisches Bundesamt, Wiesbaden
Greece
ICAP Group S.A., Athen
Bank of Greece
National Statistical Service of Greece
Deutsch-Griechische Industrie- und Handelskammer, Athen
Ireland:
Central Statistical Office
Insolvency Journal
Italy:
Creditreform Italia Modena
ISTAT, Istituto Nazionale di Statistiva, Roma
Luxembourg:
Creditreform Luxembourg SA
STATEC, Service Central de la Statistique et des Etudes
Economiques
Netherlands:
Statistics Netherlands
Norway:
Statistics Norway
Portugal:
Instituto Nacional de Estatistica
Deutsch-Portugiesische Industrie- und Handelskammer, Lisbon
Coface Portugal
Spain:
Instituto Nacional de Estadistica
Insolvencies in Europe, 2011/12
41
Sweden:
Statistics Sweden
Kronofogden, Amt für Beitreibung und Vollstreckung
Switzerland:
Schweiz. Verband Creditreform, St. Gallen
Statistik Schweiz
UK:
Office for National Statistics, London
The Insolvency Service
USA:
US Department of Commerce, Economics and
Statistics Adminstration, Washington D.C.
American Bankruptcy Institute
Further sources:
Bank for International Settlements, quarterly reports
Bureau van Dijk
European Central Bank (ECB), monthly reports
European Bank for Reconstruction and Development, Regional Economic Prospects
Federal Ministry of Economics, annual report
International Monetary Fund (IMF), World Economic Outlook
Creditreform business offices in Eastern Europe
Creditreform Eesti OÜ, Estonia
Creditreform Latvija SIA, Latvia
Creditreform Lietuva UAB, Lithuania
Creditreform Polska Sp. z o.o., Poland
Creditreform k.s., Slovakia
Creditreform d.o.o., Slovenia
Creditreform s.r.o., Czech Republic
Creditreform-Interinfo Kft., Hungary
Creditreform d.o.o. Croatia
Creditreform Romania
Creditreform Bulgaria EOOD
Creditreform RUS
42
Insolvencies in Europe, Jahr 2011/12