Insolvencies on the rise: Is Saxony threatened by a wave of bankruptcies?

Andreas Dunte

Leipzig. The Thuringian automotive supplier AE Group, the software company Digades in Zittau or the Leipzig-based construction company Gröner Group - the list of well-known Central German companies that have had to file for insolvency this year is long. At federal level, the tour operator FTI, the fashion group Esprit and the fresh food box manufacturer Tupperware stand out.

Insolvencies in Germany have reached their highest level for almost ten years at 11,000 in the first half of the year, according to the credit agency Creditreform. Compared to the same period last year, there was an increase of almost a third. In Saxony, there was an increase of 22 percent to 570 insolvencies. For 2024 as a whole, renowned insolvency administrator Lucas Flöther from Halle expects an increase to 22,000 across Germany.

In central Germany, small and medium-sized companies with up to 40 employees are particularly affected by payment difficulties, especially in the retail, automotive supply, healthcare, industrial and service sectors and, last but not least, the construction industry.

Insolvency figures at highest level for ten years

According to Creditreform, it is mainly medium-sized and large companies that are going bankrupt at a national level. The number of insolvent large companies (more than 250 employees) has doubled compared to the previous year.

Insolvencies in Germany have reached their highest level for almost ten years, according to Creditreform. Companies are struggling with the ongoing crises and the weak economic development this year.

However, more and more consumers are also experiencing payment difficulties. With 35,400 consumer insolvencies, 6.7 percent more cases were registered than in the same period last year. In Saxony, there was an increase of 8 percent.

According to a survey by the Ifo Institute, the proportion of German companies acutely fearing for their economic existence rose again in October. The steady rise in corporate insolvencies is likely to continue, according to the institute.

Leipzig-born insolvency administrator Flöther also expects a further increase. "But it won't turn into a tsunami or a wave of insolvencies. In percentage terms, the insolvency figures have been rising at a double-digit rate for two years. This is not surprising, as we had significantly fewer insolvency cases in coronavirus times because the government had partially suspended the obligation to file for insolvency."

In his opinion, "far too long, and in such a complex way that by the end hardly any managing director knew which duties actually concerned them", he criticized.

Criticism of too long a suspension of the obligation to register

The suspension of the obligation to register has led to the misconception among companies that they no longer need to think about restructuring at an early stage. Someone will help. "This has destroyed what had become increasingly prevalent before coronavirus and what we had preached like a prayer wheel: take care in good time, don't go to the dentist when the tooth is black, otherwise it can no longer be saved."

The poor business situation in many sectors is having an increasing impact on payment behavior and the amount of outstanding receivables, says a spokeswoman for Creditreform Leipzig. Suppliers and lenders are registering more overdue invoices, while at the same time granting their customers longer payment periods.

"If revenues or profits continue to fall sharply, this will jeopardize the long-term financial stability of companies. An earnings crisis can then lead to a liquidity crisis, which in the worst-case scenario will lead to a further increase in insolvencies."

"Investors keep the money together"

Payment problems are also increasingly plaguing the start-up scene. "Just a few years ago, investors were literally looking for opportunities to invest in new business ideas. The situation is completely different today. Investors are holding the money together, with fatal consequences for many founders," says Benedict Rehbein, Managing Director of the Leipzig-based physiotherapy app eCovery and promoter and coach of young founders in Saxony.

According to Statista, the number of insolvencies among start-ups across Germany had risen to 279 by the end of October - double the figure for the same period last year. "As far as I know, the situation in Leipzig and Dresden is not quite as dramatic," says Rehbein, "because the founders here are less focused on rapid growth. They have grown steadily and consistently and try to spend less when a source of funding dries up."