CORPORATE INSOLVENCY
Corporate insolvency threat
WITH A PERFECT STORM OF CREDITORS NO LONGER KEPT AT BAY, RISING COSTS, SUPPLY CHAIN HELL, AND A WAR IN EUROPE, PETER TAYLOR-WHIFFEN ASKS WHETHER WE WILL SEE A GLOBAL SURGE IN INSOLVENCIES
C
CISI.ORG/REVIEW
orporate insolvencies are likely to soar as government Covid-19 support schemes wind down around the world. A return to business
as usual will expose a raft of vulnerable firms no longer able to rely on state loans and handouts to prop up their business models. But the picture varies in different parts
of the world, thanks to a disparity in lockdown measures, a wide spectrum of state support levels, and the contrasting rates of economic recovery across the globe – and that’s before factoring in the impact of the war in Ukraine. So, is a global insolvency crisis coming, and if it is, what does this mean for investors trying to identify a sustainable business? The number of global insolvencies,
which dropped by 12% in 2020 and 2021, are likely to rise by 14% in 2023, according to a Global insolvency report published in May 2022 by credit
insurance company Allianz Trade (formerly Euler Hermes), which expects half of all countries to return to their pre-pandemic levels of insolvencies by 2023 (see chart, p.30). In England and Wales, the second
quarter of 2022 saw the highest number of insolvencies for nearly 13 years, reports the Office for National Statistics, and more than one in ten UK businesses have reported a moderate to severe risk of insolvency.
A global outlook Other countries are also seeing spikes. According to the Allianz Trade report, Austria is forecast to have the largest growth in insolvencies (up 63%) followed by India (49%), Ireland (40%), Belgium (39%), and the UK (37%), with many other significant increases also in Europe – the Netherlands, Switzerland, Greece, Hungary, Lithuania, and Latvia forecast to see an increase over 20%.
// A RETURN TO BUSINESS AS USUAL WILL EXPOSE A RAFT OF VULNERABLE FIRMS //
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