Business failures are continuing across the world. The 31% global surge in insolvencies that we saw during 2023 (and reported in Atradius Economic Research, Insolvency Outlook: post-pandemic adjustments or an adverse new normal?) appears to be stretching into 2024. Our team of Atradius economists including, Theo Smid, Iulian Ciobica and Ona Čiočytė are forecasting an increase of 23% for 2024. This is the year-on-year rise forecast for the world as a whole; some markets are experiencing spikes that are even higher.
As our economists note in the latest Insolvency Outlook, Insolvency surge isn’t over just yet, for some countries this is likely to be temporary spike with the surge confined to this year before returning to lower levels. Austria, Canada and Sweden fall into this category. But for others, including Switzerland and the UK insolvencies are stabilising at an adverse new normal.
Wider economic conditions are certainly a factor in a large number of the insolvencies. The long shadow of the pandemic is behind some of the failures. Specifically, the withdrawal of government support that had been put in place during pandemic is still being felt in several markets, especially for businesses that have to repay Covid-related loans.
In addition to this, the recent global surge in inflation followed by tightened credit conditions has resulted in a tougher economic environment for businesses. Growth is hard and insolvency is a looming risk. Businesses are experiencing higher costs, lower profits, shrinking cash reserves and higher debt burdens in the face of higher interest rates.
Whereas their forecasted insolvencies growth is modest, the UK and Switzerland are experiencing relatively high insolvency levels. This is an eye-wateringly high 147% for the UK and 125% for Switzerland compared to their pre-pandemic levels.
Australia, New Zealand, Sweden, Canada, the Netherlands and the United States also experienced a sharp rise in business failures at the beginning of this year. This is forecasted to translate in relatively high growth in insolvencies.
Denmark stands out a beacon of hope amid an otherwise bleak landscape. Our economists predict a sizeable drop in insolvencies this year (following a surge last year) and this should now level out to remain stable at pre-pandemic levels. Singapore, Poland, South Africa, Italy and Portugal are also experiencing relatively low insolvency levels.
The future also looks brighter. Our team of economists have expressed cautious optimism for 2025, citing the end of the adjustment process after the pandemic support, a more stable economic environment for businesses amid cooling interest rates and the likelihood that growth levels will gain momentum.
Download our Insolvency Outlook report