IWH Bankruptcy Update: Fewer Large Companies Declare Bankruptcy
In November, the total number of corporate bankruptcies continued to remain at a low level. A total of 684 companies declared bankruptcy last month. This is 84% of the bankruptcies registered in November of 2019 (see figure 1). The number of jobs impacted by bankruptcy has also declined further since the summer months. Of the companies declaring bankruptcy in November, the largest 10% (in terms of headcount) employed a total of 5,500 people. This was the lowest total recorded thus far this year.
New in this report is a breakdown of the largest 10% of companies by economic sector. One key takeaway is that the high number of endangered jobs in the summer was predominantly attributable to bankruptcies outside manufacturing. In turn, the most recent decline in affected jobs has also been driven primarily by fewer service sector jobs affected rather than a decline in manufacturing (see figure 2).
Furthermore, by looking just at the low bankruptcy count during the summer, the public has often overlooked the high number of jobs shed at that time, says Steffen Müller, head of the IWH Department of Structural Change and Productivity and the director of its Bankruptcy Research Unit. “Looking at job losses since the beginning of the pandemic, bankruptcy activity was at its lowest in autumn, especially in the service sector,” Müller explains. However, according to Müller, just a few large bank-ruptcies could quickly reverse this trend.
The IWH Bankruptcy Update is a flash indicator, delivering fast, reliable information on insolvencies 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 companies. Because substantial delays can occur between a bankruptcy filing and public disclosure, some of the current numbers reflect bankruptcies that happened several weeks or months ago (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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