Global insolvencies will not stabilize until 2025, Switzerland expects decline as early as 2024

Forecast for Switzerland: With a decline as early as 2024, Switzerland is one of the exceptions

Switzerland and Denmark are the exception in Europe. Only in these two countries is a decline in insolvencies already forecast for this year. "After Switzerland, unlike most European countries, had already reached its pre-pandemic insolvency level in 2022, the increase in 2023 was only 8 % and we expect to achieve a decline of 5 % this year," explains Jan Möllmann, CEO Allianz Trade Switzerland. "For 2025, we even expect a decrease of 12 %. This corresponds to 6950 cases for this year and 6150 for next year, compared to 7335 in 2023." Despite this decline, insolvencies remain above the level of 2018 to 2019. However, the looming pressure on profitability, global geopolitical uncertainties, tense financing and liquidity conditions and the strength of the Swiss franc also present Swiss companies with difficult challenges that need to be overcome.

In most advanced economies, insolvencies are (already) above pre-pandemic levels

As expected, 2023 saw a rapid and broad-based rebound in corporate insolvencies, and 2024 began with insolvencies above pre-pandemic levels in most developed countries. The number of corporate insolvencies rose again in three out of four countries in 2023, with most recording a double-digit increase. There were sharp rises in the US (+40 % in 2023) and in the eurozone as a whole (+14 %), with the Netherlands
(+52 %), France (+35 %) and Germany (+23 %) led the way.

"The increase in global insolvencies accelerated by +6 percentage points in 2023 compared to 2022 and was only dampened by declines in China (-14 %) and emerging markets such as South Africa (-13 %) and India (-8 %). Despite a slight slowdown (+15 % in 2023, -8 percentage points compared to 2022), Western Europe continued to make a significant contribution to the global increase in corporate insolvencies. North America also contributed to the global increase with a sharp acceleration (+41 %, +43 PPS). Another worrying factor is the increase in insolvencies of large companies with an annual turnover of more than EUR 50 million, which could lead to further payment default risk for smaller suppliers: in 2023, one case per day (365) was recorded worldwide," explains Maxime Lemerle, Lead Analyst for Insolvency Research at Allianz Trade.

The global acceleration in insolvencies is not yet complete, but the race to catch up is coming to an end

Lower growth, trade disruptions and geopolitical uncertainties set the stage for a further increase in global corporate insolvencies in 2024. Allianz Trade expects the third consecutive escalation this year (+9 %), driven by a continued rise in four out of five countries. The largest increases are expected in the US (+28 %), Spain (+28 %) and the Netherlands (+31 %).

"This broad-based increase would result in the number of insolvencies in 2024 exceeding the pre-pandemic figure in two out of three countries (average of 2016-2019). In 2023, this was still the case in half of the countries. Following these shocks, the economy is facing considerable headwinds and a whole range of challenges. These will now test the resilience of those companies that have become the most vulnerable over the last three years. We expect these developments to result in corporate insolvencies settling at a high level in 2025: +12 % above 2019 levels in the US, +8 % in France and +6 % in Germany," says Aylin Somersan Coqui, Global CEO of Allianz Trade.

Allianz Trade does not anticipate a tsunami of corporate insolvencies of the kind seen after the great financial crisis, when global insolvencies soared by +17 % and +19 % in 2008 and 2009 respectively. However, the increase is likely to be noticeable in several countries, particularly in the advanced economies of Europe, due to certain companies (those most affected by profitability and financing problems) and certain sectors (mainly B2C sectors and construction).

Source: www.allianz-trade.com