Lowered instances of corporate bankruptcies disclosed
In the heart of Europe, Germany has been grappling with the economic impact of the COVID-19 pandemic. Despite the challenging circumstances, the country has witnessed a decrease in corporate insolvencies in July 2020.
The photo accompanying this article shows vacant houses, a stark reminder of the economic hardship faced by many. However, the numbers tell a different story. According to recent data, companies in the construction industry filed 204 insolvency applications in July 2020, marking a significant decrease when compared to the same period last year.
This trend is not isolated to the construction sector. In the area of freelance, scientific, and technical services, 182 insolvency applications were reported in July 2020. Similarly, in the trade sector, 228 insolvency cases were recorded, making it the sector with the most corporate insolvencies.
The decrease in corporate insolvencies in Germany during this period was primarily due to government interventions such as insolvency law suspensions, financial support measures, and liquidity aids. These measures temporarily prevented or delayed insolvencies, artificially reducing the number of reported corporate insolvencies.
The Leibniz-Institute for Economic Research Halle (IWH) and data from credit agencies have supported this trend, recording a drop in filings in mid-2020, followed by a rebound once these protective measures expired or became less effective.
It's important to note that the total number of debtors who filed for insolvency in July 2020 was 5,645, a 28.4% decrease from the previous year. Of this total, 4,024 were from consumers, representing a 30.1% decrease compared to July 2019.
In the hospitality industry, 154 insolvency applications were filed in July 2020. The insolvency claims of creditors from these applications increased to 3.9 billion euros, compared to 2.8 billion euros in July 2019. Similarly, the expected claims of creditors from these insolvencies also increased to 3.9 billion euros in July 2020.
The number of insolvency applications from formerly self-employed individuals was 1,268 in July 2020. The obligation for companies to file for insolvency was suspended from March 1, 2020, which likely played a role in these numbers.
In conclusion, Germany's temporary legal relief and financial aid measures have delayed insolvencies that would have otherwise occurred during the acute phase of the coronavirus crisis, resulting in a decrease in reported corporate insolvencies in July 2020 despite ongoing economic difficulties. As these measures expire or become less effective, it is expected that the number of insolvencies will rise, reflecting the true economic impact of the pandemic.
[1] Leibniz-Institute for Economic Research Halle (IWH) (2020). Insolvency statistics Germany - July 2020. Retrieved from https://www.iwh-halle.de/en/research/research-departments/research-department-banking-and-finance/research-areas/insolvency-statistics/insolvency-statistics-germany
[2] Creditreform (2020). Insolvency statistics Germany - July 2020. Retrieved from https://www.creditreform.de/en/insolvency-statistics/insolvency-statistics-germany/
Other sectors, apart from construction, also experienced a decrease in insolvencies in July 2020. For instance, freelance, scientific, and technical services filed 182 insolvency applications, while the trade sector recorded 228 insolvency cases.
The decreased number of corporate insolvencies in Germany during this period was not only due to the improvement in the business environment, but also because of government interventions such as suspensions of insolvency laws, financial support measures, and liquidity aids.
