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Predict sudden landslide: – Can get ugly

Recent figures from Experian show a decrease in the number of bankruptcies of as much as 40.2 percent so far this year. However, Sales Director Per Ivar Kristiansen in Experian believes that the bankruptcy figures are artificially low, and fears a bankruptcy in the future.

The reason is, among other things, fewer bankruptcy petitions from the Tax Administration, as several thousand companies have been granted deferred payment of taxes and fees.

– If it turns out that companies have been kept artificially alive through the pandemic, and the Tax Administration resumes normal activity that will lead to those who in principle do not have the right to life disappearing, it can be ugly, says Kristiansen.

Experian then expects a bankruptcy increase of 50 percent compared to 2020, and 20 percent higher than in 2019.

– Like a nightmare

Audun Bøhn is one of those who has felt the feeling that the company does not survive due to corona measures.

– We quickly understood how it would go, and then it felt like a nightmare. We had had the best start to the year ever, and suddenly we had to tell our employees that we no longer had a job to offer them. It was experienced as dramatic and tough, says Bøhn.

Audun Bøhn was chairman of the board of Bacchus Spiseri AS. Photo: Private

Audun was chairman of the board and looked after the accounts in Bacchus Spiseri AS in central Oslo, where his wife Lena Bøhn was general manager. TV 2 spoke with the couple in March 2020, as they feared that the measures taken by the government would mean the end of the business.

– In 2019, we spent more than NOK 2.5 million on investing in a new wine bar. We knew we were vulnerable due to the debt, but still had some money in case bad days came. But when we had to shut down completely for so long, it became hopeless, says Audun Bøhn.

Think many have borrowed from family

The former chairman of the board describes a feeling of great fear in the first days after the closure.

– We did not know how the economy or the housing market would go, and we had mortgaged parts of the loan in our house.

He himself also worked as CFO of the Norwegian Association of Engineers and Technologists (NITO), which meant that the bankruptcy at least did not affect them both.

– Had I also had a full-time position at the restaurant, we might have had to go to the family and ask if they were willing to lend us money. I think there are many who have done that in the past year, says Bøhn.

– Must save viable businesses

Due to the investments in the wine bar, the company made a loss in 2019. Thus, Bacchus Spiseri AS was classified by the state as a company that did not have the right to life, and which consequently did not receive support.

– It felt very unreasonable. The government wants to ensure that schemes are abused, and therefore they make such strict demands that it is not possible to meet companies as it is necessary to meet with the measures. We had employees who had worked with us for over ten years, and obviously believe that the company was viable, says Bøhn.

Joachim Dagenborg, Head of Communications at SMB Norway, which is an interest organization for small and medium-sized companies, is also expecting a wave of bankruptcies.

Head of Communications at SMB Norway, Joachim Dagenborg.

Head of Communications at SMB Norway, Joachim Dagenborg. Photo: Johnny Syversen / SMB Norway

– The only reason why it has so far failed to materialize is that the Tax Administration is holding back while many thousands of businesses have been granted deferred payment of taxes and VAT, says Dagenborg, and continues:

– At some point, this will be repaid, and we fear that many will end up in bankruptcy statistics because they have not found a way out of this that is realistic. It is incredibly important that in all possible ways it is facilitated that companies that would normally be viable do not perish due to corona measures.

Hope he’s wrong

Dagenborg points out that not all companies have the right to life, and that there are also usually several companies that go bankrupt.

– The goal of the crisis packages has never been to save the companies that would not manage under a normal situation anyway. Those who would be viable in a normal situation, however, we must go to great lengths to take care of. Then we can discuss what lies in the concept of “viable”, says Dagenborg.

Per Ivar Kristiansen in Experian hopes he is wrong, and that the crisis packages have helped the right companies.

Sales Director Per Ivar Kristiansen in Experian.

Sales Director Per Ivar Kristiansen in Experian. Photo: Morten Brakestad

If the business community returns to normal during the year, he believes Norway will recover to a 2019 level. In that case, a bankruptcy increase of 2.8 per cent is expected.

– A more moderate scenario, and perhaps more realistic, is that we reach 2019 levels relatively quickly, and that bankruptcies will increase moderately through 2021. Which means an increase of about 25 percent compared to 2020, says Kristiansen.

Warns that measures end prematurely

The message from many of SMB Norway’s members is that the crisis is far from over.

– The road back to profitable operation is long for many, and some imagine that it will take up to two to three years after the corona before they return to a normal situation. It is important that the authorities keep this in mind when considering measures, says Dagenborg.

He warns that economic measures will cease the moment the population is vaccinated.

– The measures must apply as long as the business community needs it. You can not just set an end date for how long you think the companies need measures, because then we risk losing very many companies that would normally be viable.

– Not enough

Audun Bøhn believes that the state’s assistance to companies has not been close enough.

– The money we might have received had gone to pay rent and other fixed costs. It would just be to push the problems in front of him, says Bøhn.

He feels sorry for those in the catering industry who have tried to take risks and take in employees, and is not very impressed with the government’s redundancy rules.

Wages are one of the biggest costs companies have, and it is unsustainable that employers have to bear the wage costs so long after employees are laid off.

He knows of many others in the industry who have been tempted to give up.

– But because it is your workplace and you have invested a lot of money in it, you go to great lengths to manage it.

– Do you think you will see a wave of bankruptcies when the Tax Administration again begins to collect deferred taxes and fees?

– Yes, it’s obvious. This is part of the debt burden that makes you see that it does not work. The worst thing is to lay off people you have known for many years, and then have to tell them that they can not come back. You feel that you have failed them and not done the job you were supposed to, says Bøhn.

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