2022 “definitely” more corporate insolvencies

January 11, 2022 – 2021 brought another decline in corporate insolvencies. This trend is now likely to have come to an end. Since the third and especially the fourth quarter, Creditreform has registered a “normalization” of insolvency events. In the credit and insurance sector, 70 bankruptcies were counted, and the insolvency rate in the sector was roughly in line with the macroeconomic average.

After a sharp decline as a result of the corona pandemic, the number of corporate bankruptcies in 2021 fell by only 1.0 percent year-on-year to 3,076. This is evident from data that the Austrian Association Creditreform published.

A look at the details shows that this downward trend of the last year and a half is now coming to an end.

“For the first time in six quarters, the number of proceedings opened rose by 12.3 percent to over 2,000. If you look at the fourth quarter of 2021 alone, you can see that the number of proceedings opened has increased by 164 percent, ”explains Creditreform.

Return to higher bankruptcy rates

Creditreform managing director Gerhard Weinhofer sees the expiry of deferrals of health insurance contributions and payments to the tax offices as well as an increased number of applications for the opening of insolvency by these institutions as the reason for the “normalization” of insolvency events.

In addition, many entrepreneurs have pulled the rip cord due to the “volatile, highly unsettling pandemic situation in which economic planning is difficult”, as the press release says.

The causes of insolvency are generally management errors, competition (price wars and falling margins) and a lack of capital – and thus problems with the repayment of deferred duties and taxes.

Since there were only a few major bankruptcies, both the insolvency liabilities of around 1.1 billion euros and the number of jobs affected – around 8,800 – are falling sharply.

Industry comparison: more bankruptcies in transportation

In an industry comparison, the transport sector (“traffic and communications”) recorded the largest increase in insolvencies at +19.7 percent. The greatest “bankruptcy affected” was in the construction industry with 17.8 insolvencies per 1,000 companies in the sector.

In the credit and insurance sector, the number of bankruptcies fell again to 70 (–10.3 percent). At 6.3 percent, the insolvency rate was roughly in line with the macroeconomic average (6.4 percent).

Forecast: “Definitely” more bankruptcies

Creditreform has received from Univ.-Prof. Walter Schwaiger from the Technical University of Vienna have the failure risks of the companies calculated using the so-called “prevention effect”. This includes bankruptcies that have been prevented by government measures.

According to Creditreform, Schwaiger estimates that around 2,500 companies are at risk of bankruptcy. If this potential risk for the creditors were to materialize, Austria would end up again in the pre-Corona situation of 5,000 and more bankruptcies.

The risk of insolvency is increased by developments in the fight against pandemics, which cannot be assessed at present, and further economic uncertainties such as inflation and price pressure, a shortage of skilled workers and additional costs due to climate policy.

Creditreform expects that 2022 will “definitely bring more company insolvencies”.

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