IWH Bankruptcy Update: Bankruptcies in Germany Fall to an All-time Low

The number of corporate bankruptcies in Germany fell to a historic low in July, and are not anticipated to trend higher in August, according to IWH’s leading indicators. The IWH Bankruptcy Update, published by the Halle Institute for Economic Research (IWH), provides monthly statistics on corporate bankruptcies in Germany.

Authors Steffen Müller

At the beginning of July, the June statistics were initially incomplete due to technical changes made to the national bankruptcy filing website. Following final revisions to these data, the June bankruptcy figures were remarkably low. Extremely low bankruptcy rates were also witnessed in July. According to the IWH Bankruptcy Update, 639 firms reported bankruptcy last month. This is equivalent to a month-over-month change of 10%. Compared to the July 2020 figure, the number of bankruptcies was 25% lower (see figure 1). The previous record low of 654 bankruptcies was registered in November of 2020.

Comparing the aggregate headcount from the largest 10% of bankrupt firms in July with that of previous months, the July aggregate was higher. The number of impacted jobs in July was just under 7,300, which was higher than the equivalent figures from May and June (each around 4,000). Nevertheless, the number of jobs impacted by bankruptcy in July 2021 was 70% lower than that of July 2020 (see figure 2).

“The prolonged trough in bankruptcy statistics is a reflection of the economic recovery,” explains Steffen Müller, the head of Department Structural Change and Productivity and the director of Bankruptcy Research at IWH. According to Müller, the bankruptcy statistics are remarkably low by historical standards, even when taking government stimulus programmes and creditor restraint into account. Twenty years ago, for example, an average of 2,000 firms filed for bankruptcy each month, and five years ago, the figure was still more than 1,000 per month.

The IWH Bankruptcy Update is a flash indicator, delivering fast, reliable information on insolvencies of firms with entry in the commercial register in Germany two months ahead of the comprehensive official statistics. It is based on public bankruptcy announcements of German courts combined with balance sheet information of the concerned firms. Deviations from official statistics are small (see figure 3). The IWH Bankruptcy Research Unit is among Germany’s leading investigators of the causes and consequences of corporate bankruptcy.

For more on the IWH Bankruptcy Research Unit and the methodology underlying it, please visit https://www.iwh-halle.de/en/research/data-and-analysis/iwh-bank ruptcy-research/.

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