Allianz Trade forecasts 16% acceleration in global insolvencies

Global business insolvencies are predicted to increase by 6% this year, according to trade credit insurer Allianz Trade, and by a further 10% in 2024. Driven by a drop in corporate revenues and weaker demand globally, Allianz Trade said insolvencies are set to accelerate and put many sectors at risk. Hospitality, transportation and wholesale/retail are “on the front line” of insolvency risk, although other sectors including construction “are catching up fast”, it warned. Corporate revenues were down across all regions in the second quarter of this year for the first time since mid-2020, said Allianz Trade. “Liquidity positions are worsening fast and not likely to improve before 2025,” it warned. Aylin Somersan Coqui, CEO of Allianz Trade, said: “Companies still have a sizable amount of excess cash, €3.4tn in the eurozone and $2.5tn in the US. But these cash buffers remain highly concentrated in the hands of large firms and in specific sectors such as tech and consumer discretionary. And in general, most companies are unable to increase their cash positions through operations in the context of lower-for-longer economic growth.” Adding: “All in all, we expect two accelerations in global business insolvencies, with +6% in 2023 and +10% in 2024, after +1% in 2022.” Allianz Trade said that by the end of this year, most advanced economies will see insolvency levels return to normal for the first time since the pandemic. More than half of countries at 55% will likely see double-digit increases in insolvency levels, including the US (+47%), France (+36%), the Netherlands (+59%), Japan (+35%) and South Korea (+41%). “Globally, three out of five countries will reach pre-pandemic business insolvency levels by the end of 2024, including large markets such as the US and Germany,” Allianz Trade said. “On both sides of the Atlantic, GDP growth would need to double to stabilise insolvency figures, which will not occur before 2025.” Maxime Lemerle, lead analyst for insolvency research at Allianz Trade, said higher-for-longer interest rates have reduced demand in sectors including real estate, while highly indebted sectors such as utilities and telecoms will start to put solvency under pressure for companies on both sides of the Atlantic. “Moreover, global working capital requirements currently stand at a record high of 86 days, more than +2 days above pre-pandemic levels,” Lemerle explained. “Higher interest rates also make it even more expensive for companies to finance structurally higher working capital requirements, which poses risks for sectors such as construction and machinery and transport equipment.” In the UK, business insolvencies are expected to close 2023 up 16% and are forecast to rise by 5% in 2024 to 29,850 cases, before dropping 5% in 2025. Allianz Trade said it expects insolvencies in the UK to stay at around 30% above pre-pandemic levels by 2025. Hospitality, trade and manufacturing have all added to the rise in insolvencies this year, but all sectors have largely crossed 2019 pre-pandemic levels, said Allianz Trade.

Allianz Trade forecasts 16% acceleration in global insolvencies

Want to read this article?

Read Next

Alstom becomes latest firm to register French captive

Amrae re-elects Wild as president and names new board members

Brazilian states return to court to double dam collapse compensation to $19.5bn

‘Pressure rising’ on developing Asian aging risk: ADB

European business confidence in China plummets

Alstom becomes latest firm to register French captive

Amrae re-elects Wild as president and names new board members

Brazilian states return to court to double dam collapse compensation to $19.5bn

‘Pressure rising’ on developing Asian aging risk: ADB

European business confidence in China plummets

Want to read this article?

Read Next

Alstom becomes latest firm to register French captive

Amrae re-elects Wild as president and names new board members

Brazilian states return to court to double dam collapse compensation to $19.5bn

‘Pressure rising’ on developing Asian aging risk: ADB

European business confidence in China plummets

Related Articles