Between January and March, 71 percent more large corporations in Germany filed for bankruptcy than in the previous year. The number results from the sharp rise in energy prices and delivery problems. The Ukraine war could cause them to rise further in the fall.
29 companies with annual sales of at least 20 million euros filed for insolvency in the first quarter of 2022. This is reported by management consultancy Falkensteg in its first report of the year. The number is 33 percent higher than between October and December and even 71 percent below the number of major insolvencies in the first quarter of 2021. However, it is not even half the level of the first corona wave two years ago. Back then, between April and June 2020, 63 large companies went bankrupt.
Among the 29 major bankruptcies in the first three months are eight companies with annual sales of more than 100 million euros. At the top is the Pluradent from Munich. The supplier of equipment for dentists with a turnover of 310.5 million euros filed for bankruptcy in March. He is followed by Kehag Energiehandel GmbH from Oldenburg (January, 300 million euros turnover) and FAM from Magdeburg (February, 220.4 million euros turnover). FAM manufactures equipment for lignite mining.
According to Falkensteg, what is striking about the major insolvencies is that other energy suppliers were affected in addition to Kehag Energiehandel. This seems strange at first, since the prices for electricity, oil and gas have risen sharply since last autumn – which should therefore also apply to energy suppliers’ profits. But many have a problem with this, because they have promised their customers low tariffs in long-term contracts, but now have to buy energy on the market at increasingly expensive rates. This sometimes results in excessive losses.
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As a result, Kehag Energiehandel, which mainly supplies industrial companies with electricity and natural gas, had to stop delivering in December. At the turn of the year, the no longer sustainable contracts were terminated and bankruptcy was filed. This can cost Kehag dearly, because its former customers now had to negotiate more expensive tariffs with other suppliers and are allowed to sue Kehag for the difference – as long as there is enough money in the insolvency estate.
“The economic pressure could drive more suppliers and dealers into bankruptcy in the coming months,” writes Falkensteg. Utilities whose business model relies on the short-term purchase of energy and long-term contracts with customers are particularly affected. In the whole of last year, only two energy suppliers went bankrupt – in 2022 there were already four in the first three months.
For the year as a whole, the trend suggests an increase in insolvencies. Starting from the first quarter, around 120 large companies could submit an application. That would be about as many as last in 2019. While the number rose sharply to 183 major insolvencies in 2020 due to the corona crisis, it fell to just 73 in 2021 – also due to numerous aid measures by the federal government.
The Ukraine war that broke out in February could further aggravate the situation. According to Falkensteg, this will probably only become visible in the second half of the year. After all, companies are only now getting into difficulties because goods from Ukraine and Russia are missing or the sales market there is collapsing. However, it usually takes several months from the first problems to insolvency. The experts attribute the increase in the first quarter not only to the higher energy prices but also to the global supply problems that still exist due to Corona.
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What is also of concern is what will happen to companies in insolvency. Of the 73 bankruptcies in the previous year, 28 are still open. At 18, operations had to be stopped completely. Conversely, only 36 percent of the insolvent large companies could be saved. This is the worst rate since 2017. Of the bankruptcies in 2020, 17 procedures are still open.
The trend among large companies does not reflect the total number of insolvencies. According to the Federal Statistical Office, 2,566 standard insolvencies were applied for in Germany between January and March. That is around eight percent more than between October and December, but also four percent less than in the previous year – although the obligation to file for insolvency was still suspended at the time. Also compared to the first quarter of 2020 (-25 percent) and 2019 (-26 percent) fewer companies filed for bankruptcy.
Experts are still unsure whether the number of insolvencies will increase this year. But the possibility is definitely there. On the one hand, the last protective mechanisms from the pandemic are running out, on the other hand, the high energy prices and the Ukraine war are currently burdening many medium-sized companies.
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