New survey predicts numerous SME bankruptcies in 2022

Less income and more debt: the world of many Swiss SMEs is looking rather bleak. But there are also doubts about the horror scenarios.

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The big wave of bankruptcies in the Swiss corporate landscape is still a long time coming. The number of company bankruptcies will increase by 2.1 percent this year, as the Swiss creditors’ association Creditreform predicted this week. However, rates of change of this magnitude are not a noticeable phenomenon in long-term bankruptcy statistics.

A much stronger increase was to be feared, especially since in the first pandemic year of 2020 the number of bankruptcies fell by almost seven percent despite the economic slump, as the Federal Statistical Office found in April. Obviously, the state support services and in particular the Covid-19 loan program for SMEs, which is covered by federal guarantees, have served their purpose. The companies survived the officially ordered closings.

Postponed is not cancelled

But postponed is not canceled. In agreement with many economic observers, Creditreform assumes that a stronger bankruptcy wave will come after all.

This is the result of a new analysis by the consulting firm Alvarez & Marsal, which surveyed 180 Swiss companies for this purpose. The survey shows that the profitability of many companies has deteriorated significantly in the past year. Around a quarter of the companies would have earned poorly or even too little in 2020. 30 percent of the companies stated that their financial position had tightened or even acutely tightened in 2020 compared to the previous year.

Many SMEs are facing a fateful year

Many of these mainly very small SMEs are therefore likely to face a fateful New Year. Not only are businesses in danger of being damaged by the fifth wave of pandemics, which is once again striking with full force. For the troubled entrepreneurs, the long-term prospects are not rosy either.

The pessimistic forecast is also supported by a survey published this week by the State Secretariat for Economic Affairs (Seco) on the financing situation of SMEs. Of the 2,700 companies surveyed, around 63 percent used outside capital in the spring of 2021. In the last survey in 2016, it was only 38 percent. A large part of this increase in debt can be traced back to the Covid 19 loans with which the federal government and banks distributed almost CHF 17 billion among 140,000 SMEs in the country in 2020. Many SMEs only took out this free loan as a precaution, and eleven percent intend to repay this eight-year loan as early as the end of 2021.

Horror scenario remains theoretical

But eight percent of SMEs do not believe that they will be able to pay off the loan in full. The Seco states that 30 percent or a good 800 of the 2,700 SMEs surveyed have taken out a Covid 19 loan. If you transfer the quota of eight percent of non-repayable SMEs to the total of all 140,000 Covid 19 loan recipients, the result is a number of more than 11,000 companies that may no longer be able to repay the money and therefore have to file for bankruptcy .

At first glance, this very high number is offset by the well over 10,000 bankruptcies that occur every year, even in good times. In 2019 there were 13,800. How strong the expected bankruptcy wave will ultimately be remains open. It is also unclear how quickly this will roll across the country. It’s still too early for horror scenarios.