Allianz Trade: insolvency growth by2024

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Among the sectors most affected by insolvency in 2023:

• hotel business
• transport
• wholesale and retail trade

Other sectors are recovering quickly, especially construction, where the delayed work is almost completed, particularly in the residential segment. "At the same time, maintaining high interest rates reduces demand in sectors such as real estate and durable goods, and begins to put pressure on the solvency of heavily indebted sectors like services and telecommunications, as well as on real estate on both sides of the Atlantic," explained Maxim Lemel, the chief analyst for corporate insolvency research.

According to the collected data, by the end of 2023, the normalization of corporate insolvency will be completed in most developed economies, with double-digit increases expected in 55% of key countries. Among them are the USA (+47%), France (+36%), the Netherlands (+59%), Japan (+35%), and South Korea (+41%). On a global level, 3 out of 5 countries are expected to reach pre-pandemic levels of corporate insolvency by the end of 2024, including major markets like the USA and Germany. To stabilize insolvency rates, GDP growth on both sides of the Atlantic must double, which will not happen until 2025. "Moreover, in the context of slowing global economic growth, payment terms are likely to increase, contributing to a rise in insolvencies in the coming quarters," added Somersan Koki. "Average payment terms globally already exceed 60 days for 47% of businesses.

According to the report, Italy, after a long period of low insolvency rates until 2022, is now at risk of a significant acceleration in business insolvencies by 2025. The normalization process began later, in early 2023, and has been unevenly distributed across sectors, with strong growth in the manufacturing sector and most services, while the increase in defaults in retail and hospitality remains low, and in the transport and construction sectors, it is declining. Overall, the acceleration of the trend noted throughout the year is expected to lead to a closure of 2023 with 8,250 cases (+1,090 cases, or +15% year-on-year). We anticipate that prolonged economic weakness until the first half of 2024 will affect all sectors, while businesses will face higher costs, increased interest rates, and reduced availability of financing. In this context, the number of business insolvencies is expected to continue to grow in double digits in 2024 (+24%, or 1,950 cases) and remain stable in 2025 (10,200 cases).